Technology giant Apple Inc AAPL is set to report second-quarter financial results after market close on May 2, 2024, with investors and analysts ready to hear more about several catalysts, including question marks over demand in China.
A leading analyst previewed the second quarter earnings with several catalysts that could lead to a strong second half of fiscal 2024.
The Apple Analyst: Goldman Sachs analyst Michael Ng had a Buy rating on Apple and lowered the price target from $232 to $226.
Related Link: Apple Q1 Earnings Beat Estimates As Cupertino Snaps 4-Quarter Revenue Decline Streak; Stock Slides On China Weakness
The Analyst Takeaways: Second-quarter iPhone revenue could decline 11% year-over-year to $45.9 billion, according to estimates from the analyst.
"The overall industry environment for smartphones and PCS is improving, which should be supportive for AAPL product sales in C2024/25 (calendar years 2024, 2025)," Ng said.
While iPhone sales continue to see weakness, the analyst highlighted the strength of the Services segment, with the growth of the App Store helping power the segment. The analyst saw Services revenue up 14% year-over-year to $23.9 billion in the second quarter.
Another area of strength for Apple in the second quarter could be its AppleTV+ streaming platform, Ng said. The company raised prices from $6.99 to $9.99 per month in October and the second quarter will be the first to fully reflect the increase.
The analyst also highlighted AppleTV+ was licensing more third-party films in March and April, which could show an increased push to grow the content library.
Catalysts for the second half of 2024 include: the WWDC event, a reveal of generative artificial intelligence products, new product launches and the iPhone 16 product cycle, according to the analyst.
The analyst also saw Apple raising its quarterly dividend to 25 cents (from a current 24 cents quarterly) and announcing a new share buyback program.
"Investor feedback would suggest that this risk is well understood with any weakness in the stock potentially being an entry point for AAPL."
The analyst had third-quarter guidance being below consensus, but marking the last bad quarter and a "turning point in sentiment" for the company.
The iPhone 16 launch expected in September is a potential catalyst for the company sized up by Ng in the latest research report.
"As we head into the launch of iPhone 16 in September 2025 and F2025, we believe iPhone revenue and shipments should return to growth."
The analyst said Apple's strength in services, new products and a large installed user base should offset headwinds.
"We believe that the market's focus on slower product revenue growth masks the strength of the Apple ecosystem and associated revenue durability & visibility."
AAPL Price Action: Apple shares trade at $175.26 versus a 52-week trading range of $161.42 to $199.62.
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