Apple Set To Beat Q3 Earnings Estimates With Strong Services Growth: Goldman Sachs

Goldman Sachs expects Apple Inc. AAPL to beat analyst expectations when it reports third-quarter earnings after Thursday’s closing bell.

The tech giant should exceed Wall Street consensus of $1.33 earnings per share (EPS) by 3 cents on Thursday, according to Goldman Sachs analyst Michael Ng. He predicted revenue for the quarter to come in at $85.1 billion, up 4% from $81.8 billion in revenue posted a year ago.

“While Apple's iPad market share has lagged in recent quarters relative to history, we expect the recently announced new iPad models (May 7) should benefit market share in F3Q24,” he wrote in a note.

“The new iPad models represented the first new iPads since October 2022.”

Goldman Sachs maintains a Buy rating on Apple because it believes the company’s focus on slower product revenue growth does not reflect its growth in services and product innovation, Ng said.

Read Also: Apple Shares Are Surging Friday: What You Need To Know

“The majority of gross profit growth over the next five years should be driven by services, which should mark an inflection point in the services investment narrative,” he wrote.

“The durability of Apple's installed base and the resulting revenue growth visibility from attaching more services and products is what underpins the recurring revenue — or Apple-as-a-Service — opportunity.”

But Apple is exposed to downside risks such as weakening consumer demand for products and services, supply chain disruption and growing competition, Ng said.

“Although Apple is the largest company and the most well resourced among its competitors, it is not the market leader in every single business line,” he wrote. “For instance, in video streaming, it faces several key competitors that invest more heavily than Apple in content.”

Price Action: Apple was down 0.3% to $217.54 at the time of publication Tuesday.

The decline in Apple shares also impacted related ETFs:

• T-Rex 2X Long Apple Daily Target ETF AAPX slipped 1.51%.
• Direxion Daily AAPL Bull 2X Shares AAPU fell 1.94%
• Fidelity MSCI Information Technology Index ETF FTEC declined 1.51%.
• Vanguard Information Technology ETF VGT dropped 2.59%
• IShares U.S. Technology ETF IYW lost 2.62%

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