Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Here's What to Watch When Apple Reports Earnings Next Week

By Danny Vena - Oct 25, 2019 at 9:31AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Initial demand for the iPhone 11 will be at the top of the list.

Apple ( AAPL -0.61% ) has been one of the standout technology stocks of 2019, gaining more than 54% so far this year, more than double the 20% gains of the S&P 500. The stock recently recaptured the $1 trillion market cap it first attained last August, once again making it the most valuable public company, and achieving new all-time highs in the process.

Optimism about the success of the recently launched iPhone 11 and the upcoming debut of Apple TV+ have been attracting analyst upgrades, helping to drive shares higher.

Apple is scheduled to release the financial results of its fiscal fourth quarter after the market close on Wednesday, Oct. 30. Let's look at several areas that will of keen interest to investors.

Several iPhones of different colors stacked against each other.

Image source: Apple.

It's all about the iPhone

After the lukewarm reception from consumers for the pricey iPhone XR, XS, and XS Max -- which debuted at $749, $999, and $1,099 last year -- Apple investors are breathing a sigh of relief about the stronger than expected demand for the new iPhone 11 lineup.

There have been numerous reports of Apple increasing production orders for its latest flagship device after seeing stronger demand than it initially forecast. Part of the increased interest is likely the result of the cheaper price, as the iPhone 11 retails for $50 less than the corresponding iPhone XR, though the company has reportedly increased production on all three iPhone 11 models. 

Noted Apple watcher Ming-Chi Kuo, an analyst for TF International Securities is among a number of analysts that have increased estimates for iPhone, which gives additional weight to the rumors. 

The growing importance of services

Lest there be any doubt, Apple is betting big on its services segment. In Jan. 2017, CEO Tim Cook made the bold prognostication that Apple would double its services revenue over the next four years, hitting a whopping $51 billion by the end of fiscal 2021. Fast-forward to Q3 2019 and over the trailing-12-month period, services has produced revenue of $43.76 billion, placing it well within striking distance of Apple's goal. 

Earlier this year, Apple introduced four new services offerings that will help the company realize Cook's dream. Apple News+ -- the company's $10-per-month subscription news service -- made its debut in March; the Apple Card, a credit card and companion to Apple Pay, launched in August; Apple Arcade, the company's $5-per-month mobile gaming service, opened for play on Sep. 19; and the company's $4.99-per-month streaming offering -- Apple TV+ -- is scheduled to debut on Nov. 1.

The biggest takeaway from these recently introduced services is that Apple appears willing to compete on price, something that would have been unheard of just a few years ago.

China sales

After a couple of challenging quarters, Apple announced that "a return to growth in Mainland China" in the June quarter, in spite of strong foreign currency exchange rate headwinds.

Apple had addressed falling sales in the Middle Kingdom by offering consumer trade-in programs and financing offers which, combined with the Chinese government's VAT tax reduction, helped the iPhone maker return to growth, even producing record third quarter revenue. 

Investors will be watching closely to ensure that Apple's return to growth in China, its second largest market, continues and wasn't a one-off.

What to expect

For the fiscal fourth quarter, Apple is guiding for revenue in a range of $61 billion to $64 billion, which at the midpoint of its guidance would be essentially flat compared to last year. Analysts are firmly on board, as consensus estimates of $62.9 billion falls near the midpoint of management's guidance. 

Investors will likely be even more interested in Apple's forecast for the first quarter, as it will provide additional insight into the strength of iPhone 11 sales. The December quarter is historically Apple's strongest of the year, so investors will be looking for something more than tepid guidance to keep the stock at its recent all-time highs.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$163.76 (-0.61%) $-1.01
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$4,577.10 (1.42%) $64.06

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/02/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.