Apple Q2 Earnings Preview: What To Expect

Apple, Inc. AAPL investors are hoping Apple can keep the ball rolling when it reports fiscal second-quarter earnings after the market close on April 30. Here’s a look at what Wall Street is expecting from Apple.

The Numbers

Analysts are expecting Apple to report second-quarter EPS of $2.37. Analysts are also calling for revenue of $57.4 billion, down 6.1 percent from a year ago. Apple investors will also be watching unit sales and Service segment revenue closely. Revenue from iPhone sales was down 15 percent in the first quarter, but Services revenue was up 19 percent from a year ago.

Looking ahead to the second quarter, Wall Street analysts are expecting Apple to guide for EPS of $2.08 on $51.93 billion in revenue.

Analysts' Take

Several analysts have weighed in on Apple stock ahead of earnings.

Raymond James analyst Chris Caso is predicting iPhone unit sales of 42 million, down 19.6 percent from a year ago. In addition to total iPhone sales, Caso said investors should pay close attention to trends in mix and average sales price.

“Our current model assumes blended ASP could drop 15% y/y by the December quarter - with the mix-shift toward the low-end likely to negatively impact sales, margins, and related AppleCare revenue,” Caso wrote in a note.

CFRA analyst Angelo Zino is forecasting a second-quarter EPS beat of $2.38 from Apple.

“While we expect iPhone demand to be challenged by lengthening replacement cycles until a 5G device is launched in calendar year 2020, we are encouraged by recent growth in wearables, specifically the Apple Watch,” Zino wrote.

CFRA has a Buy rating and $210 target.

Bank of America analyst Wamsi Mohan is calling for EPS of $2.33, slightly below consensus estimates. Mohan said gross margins will be key for Apple.

"If Apple can report a quarter of 37-38% gross margins (within guidance range) despite the price cuts and guide q/q gross margins higher in the range of 37.5-38.5%, we would argue that the story has an upward bias to gross margins, which would be a major positive," Mohan wrote.

Bank of America has a Buy rating and $220 target.

UBS analyst Timothy Arcuri said Apple's earnings and guidance should be fine, despite iPhone mix headwinds.

"We model rev/EPS of $56.5B/$2.33 vs Street $57.6B/$2.36 and $55-59B guide on slightly lower iPhone rev due to lower ASP ($687 vs $745), supported by CIRP data and UBS procurement estimates both suggesting mix shift to older models," Arcuri wrote.

UBS has a Buy rating and $235 target.

Wedbush analyst Daniel Ives said investors can expect a rebound in Apple's China numbers in the quarter.

"As we have discussed with investors, it has been Apple's pricing hubris on iPhone XR that was the major factor in the company's December earnings debacle in China, however with some recent price cuts demand trends are slowly turning around in this all-important region for Cupertino as we expect the Street will see when the company reports on Tuesday after the bell," Ives wrote.

Wedbush has an Outperform rating and $225 target.

Volatility Ahead?

Last quarter, Apple stock initially jumped 6 percent following a modest earnings beat. Apple has a history of volatile earnings reactions.

According to Optionslam.com, Apple’s seven-day implied movement ahead of earnings based on the weekly options market is 4 percent.

Apple's stock is already up 29 percent year-to-date. Shares closed Friday at $204.30.

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