Apple's Q1 Report On Radar Amid Cupertino's Struggles To Grow Revenue: Can iPhone, Vision Pro First Impressions Lift Sagging Stock?

Apple, Inc. AAPL has remained subdued relative to the rest of its big tech peers amid plateauing fundamentals, and investors look ahead to the first quarter earnings report due Thursday, after the close, to get clarity on whether the company succeeded in breaking a four-quarter revenue decline streak.

Key Q4 Expectations:

	Q1’24 Consensus*	Q1’23	Q4’23
Revenue	$117.91B	$117.2	$89.5B
Non-GAAP EPS	$2.10	$1.88	$1.46
Gross margin	N/A	42.96%	45.17%

Apple’s first-quarter guidance issued in early November called for 2023-December quarter revenue to be flat with the year-ago period. This is despite having one less selling week than in the fourth quarter of 2022, said CFO Luca Maestri. He also flagged a one-percentage-point negative impact from forex. Since then, the U.S. dollar has weakened, potentially hurting the company less. The dollar index, which measures the greenback’s move against a basket of currencies, slid 4.36% in the December quarter amid expectations of Fed rate cuts.

Apple modeled a gross margin of 45% to 46%.

In a recent note, Morgan Stanley analyst Erik Woodring said he expects a healthy December quarter beat, with revenue and earnings per share likely coming in at $119 billion and $2.13, respectively.

Apple Product Categories: Roughly 50% of revenue comes from Apple’s flagship product, the iPhone. The company hinted at revenue growth for the product, on an absolute basis as well, after normalizing for both last year’s supply disruptions and the one extra week.

Wedbush analyst Daniel Ives said this week he expects iPhone sales to have fared well, with the consensus revenue estimate for the product at $ 68 billion.

Apple guided to a significant acceleration in the year-over-year revenue growth for Macs in the first quarter but warned of a significant deceleration in revenue growth for iPads as well as “Wearables, Home and Accessories” due to a different launch timing for these products.

See Also: Everything You Need To Know About Apple Stock

Outlook: For the second quarter, analysts expect earnings per share of $1.57 and revenue of $95.95 billion, on average. This compares to the year-ago earnings of $1.52 and revenue of $94.8 billion.

Morgan Stanley’s Woodring expects the company to guide the March quarter down. He said the tech giant will likely flag revenue and bottom-line results at $93.4 billion and $1.54, respectively, 0-3% below consensus. He sees the consensus estimates for 2024 as too high and therefore views Thursday’s earnings as a “clearing event” that will help to reset the next twelve-month estimates lower and allow investors to turn their attention towards a likely positive inflection in fundamentals in fiscal year 2025.

What Investors Look For: With Vision Pro set to release on Friday, investors may want to know first impressions about the newest hardware from Apple’s stable, said Citi analyst Atif Malik. He said that new AI efforts, the impact of Apple’s iOS, Safari, and App Store changes in compliance with the Digital Markets Act, and iPhone demand trends are among the other key focus areas.

Wedbush’s Ives said investors may pay attention to commentary on the crucial China region, which constitutes about 20% of iPhone unit sales. The analyst rubbished the “Apple demise story” and said the Services business will see steady double-digit growth in 2024, and iPhone units will likely be in the 220-million unit range.

He expects shipments of 600,000 Vision Pro headsets in 2024, driven by robust preorder trends.

Deepwater Asset Management’s Gene Munster said the pressure points for Apple would be information on the foundation model release in 2024 and the growth of the installed base of active devices.

Apple Price Action: Apple shares have been on a broad consolidation move since mid-July and have completed a double-top formation, peaking around $197-$199 in late July and mid-December. The stock has closed lower in each of the past six sessions.

In the eventuality of the weakness continues, the stock could break below its 200-day moving average of around $182.29. Further down, it has support around the $180, $174, and $168 areas. Upside resistances are around the $189, $191, and $198 levels.

The 14-day relative strength index is at 40, considered a neutral zone.

The average analysts’ price target for Apple is $206.49, according to TipRanks. Upside potential based on the price target is around 12%.

Apple’s shares are down about 4.22% year-to-date, underperforming the Invesco QQQ Trust QQQ, which is up about 1.8%.

In premarket trading on Thursday, the stock rose 0.65% to $185.60, according to Benzinga Pro data.

Photo courtesy: Apple

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