The iPhone is arguably the first thing that comes to mind when you think about Apple. Maybe a Mac or an earlier iPod might do the trick. More than $179 billion in cash and marketable securities is sure to conjure up mental images of a pile of money bigger than anything you’ve ever seen in a cartoon when you think of Apple’s financial situation. Moreover, Apple is expected to take on a new role this week, that of a bellwether for our troubled economy.
On Thursday, the California tech giant will reveal its quarterly earnings and sales for the period of July through September, the fourth quarter of its fiscal year. The crucial holiday shopping season, during which Apple regularly makes more money than many nations’ GDPs, falls outside of this time period. However, it will also involve the sale of the iPhone 14, the newest Apple Watches, and the improved AirPods Pro for a period of two weeks.
If the report is positive, it might be a good indicator of the state of the global economy. According to recent polls, a growing number of individuals fear the global economy has entered a terrible recession that might last for years. The prolonged conflict between Russia and Ukraine has contributed to artificially high energy costs, which politicians and business leaders are fighting to address despite the fact that it has reached above 8%.
Once a shining light in the economy, the tech sector is now feeling the effects of the slowdown. Alphabet, the parent company of Google, reported earnings Tuesday that were lower than projected for the third quarter. This was due in part to issues with foreign currency rates and reduced spending from advertisers. On Wednesday, Meta, the parent company of Facebook, failed Wall Street estimates and offered a projection for revenue and expenditure that scared investors so badly that the company’s shares dropped more than 22% the next day.
The future may not be any brighter for hardware manufacturers. According to market analyst IDC, “record-breaking inflation, geopolitical tensions, and other macroeconomic issues have considerably hampered consumer demand,” causing global smartphone sales to fall by more than 6% this year, to 1.27 billion devices. Meanwhile, Microsoft announced on Tuesday that it expects sales of its Windows software to power PCs to decrease by more than 30 percent over the holidays.
However, most analysts believe Apple has a chance of bucking the trend. According to Yahoo Finance’s average of analyst polls, investors may anticipate earnings of $1.27 per share from the firm, which represents a growth of almost 2% from the same period last year. That’s an increase of over 7% in revenue, reaching $88.9 billion from the previous year.
Analysts caution that even then, there are more doubts than answers due to idiosyncrasies in the financial cycle and concerning early Christmas purchasing habits.
Toni Sacconaghi, an analyst at Bernstein Research, recently sent a note to investors expressing concern that “Apple may have been a Covid beneficiary, amid work/learn from home and strong consumer spending, which could reverse,” due in large part to shifting priorities in consumers’ discretionary spending.
What Apple has to say about the sales of the iPhone 14 is crucial, he added. Investors can anticipate Apple to be positive towards iPhone 14, but this may not be indicative of the product cycle’s eventual success.
A representative from Apple did not return a call seeking comment on upcoming financial results.
Apple’s iPhone sales tend to make investors and observers nervous at all times. After all, just one category accounted for almost 50% of the firm’s annual $365 billion in sales. So it’s no wonder that experts in the field closely monitor whatever data they can get their hands on regarding its sales performance.
Every week brings fresh reports of growing or declining demand, prompting adjustments in production schedules. Unlike its lesser siblings, the iPhone 14 (beginning at $829 in the US) and iPhone 14 Plus (starting at $930), the iPhone 14 Pro (starting at $999 in the US) is rumored to be doing better in sales this time around.
Evercore ISI analyst Amit Daryanani said in a note on Monday that his firm still anticipates “excellent iPhone outcomes,” despite worries about iPhone production reduction, because high demand has been shown through research and surveys conducted by his firm.
Cowen Equity Research analysts have cited the fact that the demand for more costly “premium” cellphones has not dropped as much as other, cheaper items as a reason for their more optimistic outlook on Apple.
Morgan Stanley analysts have stated that they do not anticipate much of what Apple says on Thursday to “put to rest” any fears about spending downturns among consumers, despite the fact that Apple may wind up being a data point in the continuing discussion over the health of the global economy.
Apple will release its quarterly earnings on Thursday afternoon, and shortly thereafter, the firm will have a conference call that will be broadcast live online and open to questions from analysts.
