Earnings Watch: Will Apple Stay Fresh?
Estimize | Jul 30, 2018 01:54PM ET
Unlike Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL) seems to be heading in a steady and consistent positive economic direction. The company is set to report earnings July 31st for its third quarter (Q3) financials. The earnings per share (EPS) is projected to increase by 34% year over year (YoY), to $2.23 this quarter, from $1.67 in the year ago period. This is a promising sign even as the EPS decreased from Q2 of 2018 by $0.49. The lower EPS values of Q3’s projection can be attributed to what CNET explains as “The June quarter [being] typically Apple’s smallest of the year.” (1)h3 Earnings/h3
Similar to the EPS trends, revenue is estimated to increase by 16% YoY to $52.85 billion. It’s quarterly revenue, in comparison to Q2 of 2018 will decrease by $8.29 billion. This statistic is not as worrisome, as the strong YoY growth is a more promising indicator of Apple’s economic success—demonstrating solid growth throughout the year.
Mac and iPad sales are predicted to be virtually the same as last year’s Q3 sales with a YoY of -1% and 0% respectively.
But Apple’s new bet is in its highly anticipated iPhone 9 which is rumoured to be a cheaper alternative to the X. If Apple reveals its newest iPhone in tandem with its Q3 financial report, Apple could be in for a significant stock price increase. Furthermore, Apple’s iPhone sales are projected to increase by 4% YoY, indicating successful growth. Since the iPhone is Apple’s most popular product (in terms of units sold), the increase of sales of this product YoY mitigates the sluggish performances YoY of the mac and iPad.
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However, there is some cause for concern. Apple’s gross margins are expected to decrease by 2% YoY. So although Apple’s revenue and EPS are increasing, the amount of per dollar retention is decreasing. This is not a drastic decrease, so there should not be too much worry.
Overall, Apple seems to be in good shape and not in for a massive stock drop such as the one Facebook just recently experienced. Mac and iPad sales are sluggish, but Apple’s big moneymaker, the iPhone, is still trending well. Apple is expected to be a solid investment option with a healthy potential of growth in the near—and far—future.
How do you think Apple will do?
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