Apple (NASDAQ: AAPL) will release its fiscal first-quarter earnings for the holiday season ending December 25th on Thursday afternoon. Despite significant supply chain challenges, the corporation is projected to announce its best quarter ever. Apple’s stock has recently been hammered along with the rest of the market, so this week’s report gives the company another chance to shine.
We must recall that Apple missed Q4 revenue predictions due to supply chain difficulties and high analyst expectations three months ago. Due to the chip shortage and Covid interruptions in Southeast Asia, the business projected that it has $6 billion in supply limitations. At the time, management expected that the impact would be much greater during the Christmas fiscal Q1 period, which is the company’s busiest time of year.
The street expected $119.19 billion in revenue for the December quarterback in late October. Analyst estimates fell a little after that report, but have subsequently recovered. Current estimates are shown in yellow in the table below, which shows major financial items for the previous two Q1 quarters. Except for per-share quantities, all figures are in millions of dollars.
Aside from supply difficulties, Apple will be impacted by the US Dollar’s late 2021 surge in some markets. Given this year’s iPhone cycle, I’m most interested to see what happens to gross margins. Between increasing capacity and the normal improvements, the corporation may have taken a minor impact on profits on entry-level handsets. The inclusion of some newer higher storage tiers, on the other hand, will almost certainly bring a margin boost. Given the company’s recent margin performance, I wouldn’t be surprised if total gross margins reached 40% in this quarter.
Apple has also taken use of its size to lower operating costs as a percentage of revenue. When combined with rising revenues and, hopefully, rising margins, the corporation should set a new quarterly net income record. Apple has a good chance of exceeding $30 billion in profits in fiscal Q1, as well as generating a lot of free cash flow. Analysts forecast somewhat higher EPS growth than sales growth, as shown in the table above, thanks in part to the company’s huge buyback program.
Apple has stopped providing formal quarterly guidance since the outbreak began. On the conference calls, we’ve got some commentary, but we haven’t seen numeric guidance ranges on revenues and other items like we used to. I don’t think we’ll get formal instructions this week because of the Omicron variation and other issues. Production concerns, on the other hand, should not be an issue because sales are typically modest at this time of year. According to the table below, analysts do not expect a sequential revenue reduction as large as the five-year average of more than 30% in the March quarter. A $90 billion Q2 would be a new high for that fiscal year and don’t forget that analysts have been predicting a year-over-year sales fall in this year’s March period for quite some time. Current estimations are represented by the yellow line.
The 5G upgrade cycle has been fantastic for iPhone sales, while the work-from-home trend has been fantastic for iPad and Mac sales. Apple will continue to face difficult financial comparative periods, therefore it cannot afford to sit on its hands. According to one prominent Apple watcher, the company will release a slew of new goods later this year, and we’re also keeping an eye out for a possible AR/VR headset debut. The corporation will also continue to push its services division, which is on track to reach $100 billion in annual revenue. There is room for overall revenue growth here, as long as there isn’t a recession or other large global event that dampens consumer buying.
Apple’s stock has recently fallen along with the rest of the market on expectations of higher interest rates and Federal Reserve tightening. Although stocks rose around $7 from Monday’s low, they still ended the day more than $21 behind their recent all-time high. The stock recently went below its 50-day moving average, as shown in the chart below (purple line). The stock is also less than $8 away from its 200-day moving average (orange line), which might be a key technical test in the coming days or weeks if we get there.
Finally, on Thursday afternoon, Apple will get an opportunity to shine in this difficult market situation. Despite supply difficulties, analysts forecast another record quarter, which the corporation should easily deliver. Apple doesn’t require as much production as we approach into the March quarter, so it should be able to meet any demand it has. The stock has been battered by the market and might easily fall further, but long-term investors will see this as an opportunity to buy a terrific firm at a bargain price.
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