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Earnings preview: How will Apple gauge big tech’s health?

apple

The world’s largest market cap company, Apple, will report its FY23 Q2 earnings after the US markets close on 4 May (UK time). The tech giant’s shares have rebounded about 37% from the January low, only 8% from its all-time high of $183 in January 2022.  

While iPhone sales are seeing a rebound in China, its service revenue may gain momentum in growth. Apple recently launched high-yield saving account may suggest that the tech giant thrives into fintech business. Apple’s earnings could be a 50/50 bid to steer its near-term share price action. So, what numbers will investors be looking at in its upcoming earnings reports?   

Revenue may decline for second straight quarter  

Apple’s year-over-year revenue fell for the first time in the fourth quarter of 2022, down 5.5% to $117.15 billion. Its earnings per share also tumbled 10.9% from a year ago. The primary factor that dragged on Apple’s performance was China’s production disruption due to Covid-19 restrictions, as the Great China market accounts for one-fifth of Apple’s revenue. iPhone sales slumped 8% year on year to $65.78 billion in the final quarter of last year, representing 56% of the overall revenue. Apart from the above, a strong US dollar and macro headwinds have also hurt its sales.  

According to Yahoo Finance, Apple’s revenue is expected to fall 4.4% annually to $93 billion in the first quarter, and the earnings per share is forecasted at $1.43, or a 6% drop from a year ago. 

iPhone sales are expected to rebound in China following the reopening of its economy, although the economic recovery is in doubt. According to Counterpoint, a global industry analysis firm headquartered in Hong Kong, iPhone sales were seen a sharp rebound to 6.7 million units on a weekly average during the Chinese New Year holiday season, with its first-quarter sales up 6% year on year, while the overall smartphone sales fell 5% annually in China. However, the sales growth was also partially due to the retailer’s rare price cuts in February in response to slumped demands.  

Apple service may continue strong growth   

Notably, the second largest contributor to iPhone’s revenue, Apple services, including iCloud, Apple Music, Apple Card, and Apple TV, hit an all-time high of $20.8 billion in the fourth quarter of 2022. Amid macro headwinds and production hurdles, Apple seems to start shifting some of its hardware-concentrated business to software development. Though recently launched "Buy Now Pay Later" brings uncertainties in the tough economic environment, its high yield savings account brought in almost $1 billion deposit in four days, suggesting the tech giant may gather traction in the fintech business. 

Source: Appleinsider

iPad sales set to slow  

The iPad sales grew 30% year on year in Apple’s FY23 Q1 earnings, one of the two segments that were  positive growth apart from Apple services. However a lack of new models for the first quarter may lead to a decline in the segment’s growth, though this will not be a major issue for Apple as iPad sales only account for 7% of Apple’s overall revenue.  

Technical analysis 

Apple  

Source: CMC Markets NG as of 02 May 2023

The directional bias stays bullish in Apple’s shares as its price potentially breakout the descending trendline, heading to 176, which is high in August 2022. The near-term support could be at 156, the 61.80% retracement of Fibonacci. A breakdown below this level could take its shares to approach support of 200-day moving average of 151.  

 


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