Stock Market » Apple Earnings Overview and AAPL Stock Analysis

Apple Q1 preview: What's next for AAPL stocks?

Apple has struggled to meet demand for its latest iPhone due to supply chain challenges and growth is expected to lag the rest of Big Tech this year. How will AAPL shares perform on the stock exchange under these circumstances?

When will Apple release its first quarter results?

Apple is expected to release results covering the first quarter of its fiscal year on Thursday, January 27.

Overview of Apple's first quarter results

Apple missed expectations for the first time in more than two years when it released its latest round of quarterly results last October. This was after the company shipped fewer iPhones than expected due to supply constraints and the disruption of manufacturing in Asia by Covid-19, underscoring that even the biggest companies are grappling with the challenges of supply chain that are hitting the tech industry.

Having cost Apple around $6 billion last quarter, supply issues could worsen in the first of its new fiscal year – and that could be significant given the last three months of the calendar year that house the busy holiday shopping season typically marks Apple's best quarter for sales.

Still, Wall Street expects revenue to hit a new quarterly record of $119.33 billion, up more than 7% from $111.44 billion a year earlier. Analysts expect EPS to rise more than 13% to $1.91 in the first quarter from $1.68 a year earlier.

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Hardware sales — ranging from iPhones and iPads to Mac computers and its line of home and wearable devices — are expected to grow timidly by just 3.7% to $99.21 billion. That's especially low given the numbers will be flattered by the previous year's numbers caused by the delayed launch of the iPhone 12.

The biggest fear is that the supply constraint will last long enough to cause customers to delay the upgrade, skip the iPhone 13 launched last September, and wait for the next model to be introduced. With that in mind, iPhone sales – which account for 52% of Apple's revenue – in the first half of the fiscal year will be key in deciding whether Apple can pull off another record year of iPhone sales. Analysts currently believe Apple can sell 240 million iPhones this year, although some have forecast lower estimates, with Bloomberg suggesting tough conditions will see it close in on 225 million units.

It also increases pressure on Apple to accelerate its shift to services, which enjoys higher margins and isn't suffering from the supply issues plaguing the product division. The services division currently accounts for less than a fifth of Apple's revenue, but is growing at a much faster rate - with revenue expected to rise 18.5% to $18.68 billion in the first quarter - and shows a gross margin of almost 70% compared to the 35% it sells devices. The superior profitability of its services division should allow Apple to absorb the increase in costs generated by the products division.

Apple released a lengthy press release earlier this month that revealed more than 745 million people paid for Apple subscriptions. This figure is believed to have increased from 660 million in the middle of 2021. Meanwhile, he revealed that his App Store serves more than 600 million people every week.

The services unit offers multiple avenues of growth for Apple, with the scope of opportunities demonstrated by the areas highlighted by the company in the announcement – ​​including Apple Arcade, Apple Music, Apple TV, Apple Fitness, Apple News, Apple Podcasts, Apple Books, Apple Card, Apple Maps, iCloud and its own digital wallet.

Sales of physical devices are expected to continue to grow this year, just at a significantly slower pace compared to what investors have grown accustomed to, and analysts believe that will remain the trend not just this year but the next. Therefore, Apple needs to explore as many opportunities as possible to leverage its user base. But it's important to remember that Apple's services ecosystem is driven primarily by people with Apple devices, so hardware sales remain a key driver of Apple's ability to grow its services division on the long term.

Coming back to this week, sales of iPhones and other Apple devices will be key in deciding the market's reaction. A beat would give confidence that supply issues are beginning to ease, while any disappointment raises fears that the year could be a disappointment for iPhone sales. It has the opportunity to counter this by accelerating the growth of higher-margin services.

Wall Street thinks all of Big Tech will experience a significant slowdown in growth this year after record sales and profits in 2021, but Apple should see the brakes applied the most. Analysts currently expect Apple to post revenue growth of 4.4% and EPS growth of just 2% in the current fiscal year. That would be a marked deceleration from the 33% revenue growth and 71% rise in profits in the past fiscal year. Meanwhile, the rest of Big Tech – Amazon, Alphabet, Meta and Microsoft – should continue to generate double-digit revenue increases and superior earnings growth in 2022. If Wall Street forecasts materialize, then we We could also see Apple, which became the first company to briefly surpass a $3 trillion valuation in early 2022, dethroned as the world's most valuable publicly traded company.

What's next on the stock market for AAPL shares?

Apple (AAPL) stock has lost more than 10% in stock market value since the start of 2022, largely in line with the broader declines seen in Big Tech stocks over the new year.

If the current trend persists, as suggested by the bearish RSI and rising volumes, Apple shares could retest the 100-day moving average SMA at $156. A break below opens the door to $147, a key support level in October and November and in line with the 200-day moving average SMA.

The hammer candlestick that emerged yesterday suggests that more sellers entered the market to fuel the stock market selloff before being countered by an influx of buyers that helped push the stock higher. This could indicate that a potential reversal is about to occur which could send the stock higher, although this needs to be confirmed today. If APPL stock can begin to find higher ground again in the stock market, then the stock initially targets the 50-day moving average at $168 before it can start targeting the all-time high of $183 in early 2022.

AAPL shares have been trending lower in the stock market since the start of 2022

The 43 brokers who cover Apple have a buy rating on the stock and believe the year-to-date selling has been overdone, with an average target price of $180.84, implying there is has over 14% upside potential from the current stock price and a new record high on the charts.

By Joshua Warner, Forex.com » Official Site

Disclaimer: The information and opinions contained in this report are provided for general information only and do not constitute an offer or solicitation to buy or sell any forex exchange contracts or CFDs. . Although the information contained herein has been obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, and assumes no responsibility for any direct, indirect or consequential damages which may result from the fact that anyone relies on such information.