Apple Awaits Earnings Call Amid a Year of Declines and Opportunities

As Wall Street gears up for Apple's (NASDAQ: AAPL) fiscal Q2 2024 earnings report, due to be released after the closing bell on Thursday, investors are closely watching the tech giant's performance amidst a backdrop of consecutive quarterly revenue declines and market challenges, especially in critical regions such as China.

Analysts brace for a report that could display Apple's first revenue decline in over a year. Expectations are set for the company to announce revenues of $90.6 billion, which would represent a 4.5% year-over-year dip. Apple, which has weathered revenue setbacks in the previous four quarters, nonetheless anticipates its Q2 revenues to align closely with last year's figures, hinting at a potential stabilisation.

Apple's stronghold on the global smartphone market is being tested, particularly in China—its second-largest market—where it faces stiff competition from national titan Huawei. Concerns over iPhone sales in this region could weigh heavily on the earnings report, potentially impacting investor confidence.

Further scrutiny is placed on Apple's earnings per share (EPS), which is projected to experience a slight decrease of around 0.66% compared to the previous quarter. However, this modest drop has not deterred analysts from seeing a buying opportunity; Bernstein has recently upgraded Apple stock from “market perform” to “outperform,” anticipating a possible post-earnings bounce.

Analyst views on AAPL

Looking beyond immediate financial metrics, the investment community is also buzzing about the futuristic prospects of artificial intelligence (AI) within Apple's ecosystem. JPMorgan analyst Samik Chatterjee points to AI as a potential catalyst for a significant iPhone upgrade cycle akin to the one spurred by 5G technology. In a market increasingly fascinated by the possibilities of AI, Apple's previous teases about its AI initiatives—hinted at by CEO Tim Cook during the last earnings call—remain at the forefront of strategic speculations.

Bernstein has upgraded Apple's (AAPL) rating to Outperform from Market Perform with an unchanged price target of $195. Bernstein believes that there will be a strong iPhone 16 cycle, and this could be linked to replacement cycle tailwinds and incremental generative AI features.

Citi analyst Atif Malik has lowered the firm's price target on Apple to $210 from $220. They have kept a Buy rating on the shares. Malik expects Apple's March Q1 sales and earnings to come in below estimates. The prediction remains conservative on the demand for iPhones in 2024, especially in China. They are apprehensive about the timing of the demonstrate generative artificial intelligence features to boost unit demand in 2025. However, Citi believes first half of 2024 “bad news” is largely priced into the shares. Investors are looking through the upcoming earnings to WWDC24 event in June for AI updates, it adds.

Apple has not been immune to market turbulence. It stood as the worst-performing stock amongst the tech giants colloquially known as the “Magnificent 7” last year. Despite this distinction, Apple's stock price still grew by an impressive 49%, leaving analysts optimistic due to what many perceive as reasonable valuations and potentially undervalued opportunities.

As the earnings call unfolds, stakeholders will be paying close attention to Apple's commentary on its business in China, the forecast for iPhone sales, the performance of newer products like the Vision Pro, and the overarching strategy for AI deployment.

In a market that rewards foresight and punishes complacency, Apple stands at a crossroads of challenge and opportunity. How the company navigates these waters could redefine its trajectory for quarters, if not years, to come.