Apple (AAPL) is set to release first quarter fiscal 2019 earnings results after the closing bell Tuesday.
After losing some 10% of their value following the company’s disappointing guidance on Jan. 2, Apple shares have come roaring back, gaining 11% in the past three weeks. But can they hold onto those gains or should investors brace for more bad news?
Citing weaker-than-expected iPhone sales and headwinds in China, Apple a few weeks ago warned investors that revenue for its fiscal first quarter would likely fall short of its own expectations. Apple, which previously guided for Q1 revenue of $89 billion to $93 billion, reduced those figures by 8% to $84 billion.
“We believe the economic environment in China has been further impacted by rising trade tensions with the United States,” CEO Tim Cook wrote in a letter to investors.
Fast-forward three weeks later, Apple shares have not only recovered from the early January losses, they look poised to keep climbing. On Tuesday investors are hoping for the best, banking on Apple — which became the first company in the U.S. to reach a $1 trillion stock market value — to say or reveal something to generate excitement about the company’s long-term strength beyond iPhone unit sales.
In the three months that ended December, Wall Street expect the Cupertino, Calif.-based tech giant to earn $4.17 per share on revenue of $84.04 billion. This compares to the year-ago quarter when earnings came to $3.89 per share on revenue of $88.29 billion. For the full year, ending September, earnings are expected to rise 0.89% year over year to $12.02 per share, while full-year revenue of $259.91 billion would decline 2% year over year.
In the fourth quarter, Apple spooked the market by announcing that it will no longer disclose how many iPhones, iPads and Macs it sells each quarter. With reports that the company is reducing the size of its workforce assigned to driverless car technology, Apple is seemingly reassessing its priorities as it adjusts to a waning demand for iPhones — its bread-and-butter product.
As such, analysts will begin to focus more on Apple’s revenue diversification strategy.
One area worth monitoring is non-iPhone revenues such as its Services segment, which accounted for 18% of Apple’s Q4 revenues. Services revenues includes results from Internet Services, App Store, Apple Music, Apple Care, Apple Pay, and licensing. Can these collective streams continue to grow to become the new cash cow for the company? Elsewhere, analysts will focus on Apple’s Wearables business, which includes Apple Watch, Beats and AirPods.
These devices, which are a part of Apple’s "Other Products” group, which also includes Apple TV, HomePod and iPod Touch, accounted for 7% the company’s Q4 revenues. Can they continue to grow? We will have to wait for the results. But at around $157 per share, down from its all-time high of $233, Apple stock trades at around twelve times fiscal 2019 EPS estimates of $12.02 per share, creating an appealing risk/reward profile for long-term investors.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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