Apple Earnings: This Week's Big Tech Story to Watch

The quarterly tech Super Bowl is likely to serve up some surprises. Could Apple beat expectations?

Jul 20, 2014 at 10:00AM

On Tuesday, the Street will be tuning into the earnings report from the world's most valuable publicly traded company: Apple (NASDAQ:AAPL). The company will be sharing its third-quarter results after market close, and host a live conference call at 5 p.m. ET. Here are the general expectations going into the report, and why Apple may be reporting some big numbers.

Apple Store China

The expectations
While revenue and earnings per share will certainly be closely scrutinized when the tech giant reports earnings on Tuesday, the big number the market will likely look to first is iPhone sales. At about 57% of Apple's revenue, the phone can ultimately make or break a quarter for the company.

The consensus analyst estimate for Apple's iPhone sales is 35 million units. This is well above Apple's 31.2 million iPhones sold in the year-ago quarter, showing the market's confidence in Apple's continued success at the high end. The year-over-year growth and record third-quarter iPhone sales would go against Samsung's recent pre-earnings report that warned a decline in year-over-year smartphone sales for the same period. 

Iphone

Analysts expect the company to report revenue of $37.9 billion, up 7.4% from the year-ago quarter. The consensus for EPS is more optimistic as Apple continues to leverage earnings growth by using cash to repurchase shares. Analysts expect EPS of $1.28, up 16% from the year-ago quarter.

Potential drivers for a big quarter
Apple shouldn't have any trouble meeting expectations. Two factors in particular should serve as major drivers for year-over-year growth.

1. New carriers. Since the year-ago quarter, Apple has added a number of new carriers. Two of these carriers, China Mobile and Japan's NTT DoCoMo are the largest mobile phone carriers in their home country.

2. Discounted older models. Apple has said on multiple occasions that the older iPhone 4s has been a hot seller in emerging markets thanks to a much lower price point than Apple's flagship phone. Indeed, in recently released data from ABI Research, Apple said that the iPhone 4s was the world's fifth best-selling high-end phone in the first quarter of 2014. There's no reason this pattern shouldn't continue into the second calendar quarter of 2014, or Apple's third fiscal quarter.

A recent estimate from Needham & Co. analyst Charlie Wolf supports this notion. In Apple's second quarter, Wolf estimates Apple sold 10 million 4s devices. This would account for a meaningful 23% of Apple's total iPhone sales during the quarter.

Iphone

Image source: Apple.

With solid reasons for iPhone sales to be robust, Apple will likely serve up numbers that remind investors why Apple is a great long-term investment: it consistently dominates the high-end market.

The biggest risk to revenue and earnings could come from weak iPad sales. In Apple's most recent quarter, iPad unit sales were down 16% from the year-ago quarter. With the global tablet market facing challenges, Apple could disappoint in this area. And at about 17% of Apple's revenue, a bad quarter for Apple's iPad segment could have a meaningful impact on revenue and EPS.

Whether Apple beats estimates, or not, one quarters results is usually not enough to make or break an investment thesis for long-term investors -- especially one for a market leader like Apple. Apple shareholders, therefore, should simply use the report as an opportunity to check in and make sure the company is at least meeting or exceeding their expectations. But given Apple's conservative valuation, chances are there won't be any reason to ditch this long-term investment opportunity.

Leaked: Apple's next smart device (warning -- it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee that its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are even claiming that its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts that 485 million of these devices will be sold per year. But one small company makes this gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and to see Apple's newest smart gizmo, just click here!

Daniel Sparks owns shares of Apple. The Motley Fool recommends Apple and China Mobile and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers