Apple Q4 preview: Where next for the Apple share price?

Josh Warner
By :  ,  Market Analyst

When will Apple release Q4 earnings?

Apple will publish fourth quarter and full year results on Thursday October 28.

 

Apple Q4 earnings preview: what to expect from the results

The supply crunch for chips and components remains centre stage ahead of the results, with investors keen to know how Apple has handled the supply chain problems following reports that it has been forced to trim production in recent months.

Notably, markets are bullish that Apple has mitigated the issues better than it rivals. In fact, analysts see iPhone year-on-year sales growth accelerating to 57% in the fourth quarter from 50% in the third, which would lead to the second best quarter for sales of its mobile device on record.

The rise in iPhone sales, partly spurred on by more people wanting to upgrade to 5G and attractive deals offered by telecoms firms, will also spur-on growth for its Services unit as more people tap-into the Apple ecosystem to get the best out of their new phones. There is growing regulatory pressure on the Services unit, such as on the commissions it collects from app developers, but these headwinds are expected to start being felt in the new financial year rather than the fourth quarter, leading analysts to believe Services revenue can grow over 20% year-on-year.

Wall Street is forecasting Apple’s fourth quarter revenue will rise to $84.80 billion from $64.70 billion the year before, marking another new quarterly record. Here is a breakdown of revenue expectations by segment along with the comparative figure from the fourth quarter of last year:

  • Services: $17.57 billion versus $14.55 billion (+20.7% YoY)
  • iPhone: $41.60 billion versus $26.44 billion (+57%)
  • Mac: $9.31 billion versus $9.03 billion (+3.1%)
  • iPad: $7.16 billion versus $6.79 billion (+5.4%)
  • Wearables, Home and Accessories: $9.28 billion versus $7.88 billion (+17.8%)

Earnings per share in the final three months of the financial year to late September is forecast to come in at $1.22 compared to just $0.73 last year. Profitability will be closely-watched. Although confidence is high that Apple has been able to meet demand amid the scramble for parts and chips, there are concerns that it may have had to sacrifice profitability by paying more for the supplies it needs due to the inflationary environment that is leading to higher costs across the board for most businesses.

If Apple hits market expectations for the fourth quarter, then it should lead to annual revenue growing 33% to $366.2 billion from $274.5 billion and for EPS to increase over 70% to $5.60 from $3.28.

Although markets seem convinced Apple is managing the supply crunch, they will be seeking reassurance that these problems will not weigh on iPhone sales during the first half of the new financial year as it will be a key sales period for the company. If it struggles to keep up with demand in the first half and pushes more sales into the second, then there is a risk more people will hold-off purchasing the iPhone 13 and instead wait for Apple to release a new model. With this in mind, sales in the first half of the new financial year will be key in deciding if Apple can deliver another year of record iPhone sales.

Apple shares have climbed over 80% in value since the pandemic started, having reaped the rewards from the increase in demand for tech and digital services. Having become America’s first publicly-traded business to breach the $1 trillion mark in August 2018, the company now boasts a value closer to $2.5 trillion. Still, the 41 brokers covering the stock remain bullish with an average Buy rating and a target price of $168.89, implying there is over 13% potential upside from the current share price and that Apple can surpass the $157.26 all-time high hit on September 7.

 

Where next for the Apple share price?

Apple share price trades around 6% off its all time high. Whilst the price corrected lower after hitting $157, it found support at $138 at the start of the month and has since rebounded higher, retaking both the 50 & 100 sma.  

Buyers are testing $150 resistance and previous record high, in order to target $157 and more all time highs.  

Meanwhile, on the downside a break below 138 would be significant with sellers gaining traction below this level. 

Where next for the Apple share price?

 

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