Apple Earnings: Watch Guidance

  • In Business
  • 2019-01-11 15:33:00Z
  • By Daniel Sparks, The Motley Fool

Apple (NASDAQ: AAPL) is scheduled to report its fiscal first-quarter results on Jan. 29. The company has already provided preliminary estimates on some key figures from the quarter, including:

But one major question remains: Will Apple guide for another quarter of declining revenue?

Apple marketing chief Phil Schiller reveals the iPhone XR. Image source: Apple.

Why investors should watch guidance

The tech stock's growth story has come into question recently, as Apple's latest iPhone lineup is having trouble living up to tough comparisons in the year-ago quarter. The Street's concerns about Apple's growth potential are particularly evident in the stock's cheap valuation: Apple shares trade at just 13 times earnings.

As CEO Tim Cook said in the company's preliminary update on its fiscal first-quarter results, the tech giant's top line declined on a year-over-year basis. Revenue for the period is expected to come in around $84 billion, down from $88.3 billion in the year-ago quarter -- and Apple is blaming the drop on a shortfall in iPhone revenue. Notably, this would mark the company's first year-over-year revenue decline since the fourth quarter of fiscal 2016. It's no wonder, therefore, that surprising news of falling revenue in Q1 sparked a sell-off in the stock.

The question now, however, is whether a trend of year-over-year declines will persist for yet another quarter or even longer. Investors will get a better idea of how bad Apple's headwinds are when they see management's revenue guidance for its fiscal second quarter.

What to look for

While there's no way to pinpoint what Apple management will guide for when it releases its earnings later this month, the number to beat will be $61.1 billion. This is the revenue Apple posted in its second quarter of fiscal 2018. Guidance for anything below this figure would mean that management expects another quarter of falling revenue on a year-over-year basis.

Fortunately, the iPhone is typically less important to Apple's fiscal second-quarter results than it is to its fiscal first-quarter results. Case in point: In Apple's first quarter of fiscal 2018, iPhone accounted for a whopping 70% of total revenue during the period, but made up 62% of revenue in Apple's fiscal second quarter of 2018. With iPhone being seasonally less important to Apple's overall results in its fiscal second quarter, the company's smaller but faster-growing segments -- services and "other products" -- could be enough to help prevent yet another instance of declining revenue even if iPhone revenue falls slightly.

Ultimately, however, forecasting Apple's quarterly revenue without management's guidance is simply a difficult task. This is why investors will want to check in on management's revenue guidance for its fiscal second quarter.

Daniel Sparks owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.


More Related News

Apple Hires Samsung Battery Executive to Help Lead Its Own Work
Apple Hires Samsung Battery Executive to Help Lead Its Own Work
  • Tech
  • 2019-01-23 23:17:43Z

Soonho Ahn joined Apple in December as global head of battery developments, after working as a senior vice president at Samsung SDI since 2015, according to his LinkedIn profile. At Samsung SDI, Ahn led development of lithium battery packs and worked on "next-generation" battery technology

Apple says the iPhone will be very useful after the climate apocalypse
Apple says the iPhone will be very useful after the climate apocalypse

In the end times, when the Earth is populated solely by roving bands of marauders, at least we'll know Apple was able to find new ways to profit from the iPhone. The environmental nonprofit CDP (formerly the Carbon Disclosure Project) dropped its latest report on Tuesday, and it's very depressing. The group asked more than 7,000 companies to share the risks and opportunities that come with climate change, reported Bloomberg. And it turns out there is money to be made even in a world ravaged by drought and storms. SEE ALSO: Guess what? U.S. carbon emissions popped back up in a big way Apple notes that "as people begin to experience severe weather events with greater frequency, we...

Apple's 2020 iPhones will likely get upgraded displays after the XR disappoints

Apple's 2020 lineup of iPhones are likely to ditch LCD displays completely in favor of OLED, according to The Wall Street Journal.

Foxconn says trying to hire 50,000 people in first quarter after job cut reports
Foxconn says trying to hire 50,000 people in first quarter after job cut reports

Taiwan's Foxconn, assembler of Apple Inc's iPhones, on Tuesday said it was trying to recruit for more than 50,000 positions across its China campuses for the January-March quarter, amid reports of mass lay-offs. The world's largest contract manufacturer, formally known as Hon Hai Precision Industry Co Ltd, said in a stock exchange filing that changes in employee numbers were part of its usual adjustments based on global strategy and clients' needs. Last week, the Nikkei reported that Foxconn had let go around 50,000 contract workers in China since October, months earlier than normal.

Why You Should Believe This Apple iPhone Rumor
Why You Should Believe This Apple iPhone Rumor

Remarks from a key Apple supplier's earnings call point toward its accuracy.

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply


Top News: Business

Hit "Like"
Don't miss any important news
Thanks, you don't need to show me this anymore.