Apple Q1 earnings preview: Where next for AAPL stock?

Apple’s most important quarter for sales was hit by supply chain disruption in China.


When will Apple release Q1 earnings?

Apple will release first quarter earnings after US markets close on Thursday February 2. A conference call will be held on the same day at 1400 PT (1700 ET).


Apple Q1 earnings consensus

Wall Street forecasts revenue will be down 1.9% from last year in the first quarter at $121.6 billion while diluted earnings per share are expected to fall 7.3% to $1.95.


Apple Q1 earnings preview

Apple proved to be more resilient than its Big Tech rivals in the last quarter, but things may be more challenging this time.

Apple is expected to report its first fall in quarterly sales in over three years this week, driven by the drop in iPhone and Mac sales as supply chain challenges and softer demand for devices bites. That is set to be enough to offset higher demand for iPads, its wearables and other devices, and services. Foreign exchange headwinds will also continue to weigh on the topline.

Apple's revenue is expected to fall thanks to lower iPhone and Mac sales

(Source: Bloomberg)

That would also mean Apple will fail to deliver growth over the so-called Golden Quarter that covers the busy holiday shopping season for the first time since at least the start of the millennium. The debate now is how many of these sales will be pushed into 2023 and how many will be lost entirely.

Apple has trimmed its outlook by 3 million handsets in response to softer demand and supply chain constraints in China, but some analysts believe the impact could be greater. Lower-end models are not as in-demand as first hoped while premium-end models like the Pro and Pro Max have been hit by bottlenecks that could have seen supplies lag demand over the key quarter.

However, some research suggests Apple had a stronger quarter in China than anticipated. The company is thought to have won its biggest quarterly market share in China on record at 24% in the last three months of 2022, according to Counterpoint Research data. It was the best performer in the period and was the second largest seller on an annualised basis for the first time. This suggests that either the disruption was not as bad as feared, or that Apple navigated a broader downturn better than its rivals and gained ground on its Chinese competitors.

Investors will be hoping that any lost sales in the first quarter of the financial year can started to be recovered in the second now that China has abandoned its zero-tolerant approach to Covid-19 and is reopening this year. Its largest supplier Foxconn said the biggest iPhone factory has ‘basically returned to normal’ in January after suffering from Covid-19 disruption and worker unrest in December. Still, Apple has learnt the consequences of relying on one country for the bulk of its supply and, in response, is shifting more production out of China and into countries like India, while also diversifying its supplier base to wean itself off depending so heavily on companies like Foxconn.

Meanwhile, earnings are under pressure as it continues to face tough comparatives, costs continue to climb and sales stutter, with operating expenses forecast to jump over 15% from last year in the quarter. It is worth noting that Apple should win some applause for cost control. For example, Apple’s margins are still considerably higher now they were before the pandemic hit despite persistently high inflation, and it hasn’t had to announce substantial job cuts after being the only member of Big Tech not to go on an overzealous hiring spree when demand exploded during the pandemic.

Plus, Apple wielded its healthy cash balance last year and accelerated share buybacks to help support the bottom-line, a tactic it could continue to deploy should it want to capitalise on the drop in its share price and bolster EPS. 

Concerns around demand will put pressure on the outlook. Markets think the current quarter will also be challenging with tepid revenue growth and another quarter of lower earnings, but they see both metrics returning to growth in the second half of the financial year. That should, as far as Wall Street is concerned, allow it to eke out 2.3% revenue growth and a 1% rise in annual EPS in the year to September 24, 2023.


Where next for AAPL stock?

Apple shares have rallied higher since hitting 18-month lows in early 2023. The stock has now gained ground for eight consecutive sessions and is up over 16% since bottoming-out on January 5.

The immediate job is to keep up the momentum, which may prove more difficult as the RSI approaches overbought territory. The 200-day moving average, currently at $148, is the next upside target that needs to be recaptured before it can target $151, marking the June 2022 high. A move over $157 is then on the cards, having surfaced as a level of both support and resistance on several occasions over the past year. The 41 brokers that cover the stock see greater potential with an average target price of $171.

Investors hope that the 100-day moving average can provide some fresh support if the stock comes under renewed pressure, although the 50-day moving average may be more reliable considering this is closer to the pandemic-induced low of $138. Any move below here brings the 200-low of $130 back onto the radar.

Can Apple stock keep up the momentum following the recent rally?



Take advantage of extended hours trading

Apple will release earnings after US markets close and most traders must wait until they reopen the following day before being able to trade. But by then, the news has already been digested and the instant reaction in share price has happened in after-hours trading. To react immediately, traders should take their positions in pre-and post-market sessions.

With this in mind, you can take advantage of our service that allows you to trade Apple and other tech stocks using our extended hours offering.

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