Apple Reports Earnings Tomorrow. Here’s What to Expect

You know how being a bear is more fun than being a bull? Apple (AAPL) reports its fiscal third quarter earnings tomorrow, which are worth studying just for the stock’s remarkable volatility.

As David Shearer of Wealth Manager notes, this week marked the first time in over two years that Apple didn’t report a profit from its phone business, the greatest cash cow in tech, with lots of exposure to emerging markets.

Sigh. Those flying pigs under bright skies. Some numbers to look for:

The iPhone Watch has been a late entrant in the smartwatch market, having just launched last year in September. Watch sales in the April-June quarter could be as much as 60% lower than the same period last year. Watch sales in the March quarter were up 36% year-on-year; perhaps we’ll see more growth in the June quarter than last year.

The June quarter brought the $1,149.20 iPhone XR that launched in November 2018. Apple made that bigger than the big 9.7-inch screen from last year’s iPhone X, and that sounds like a huge mistake. (More on that later.) The $1,000 iPhone XS Max’s $1,799 starting price is a jolt too, especially as the LCD screen that Apple has switched to for its top phones is also priced lower than the OLED screens from the XS and XS Max’s predecessors.

Although Apple has not updated the iPod, it’s important to note that the company is discontinuing its iPhone 3GS, the first smartphone from 2007. That may reflect the growth in home-made smartphone music players and the disappearing of the music-playing smartphone category.

The Apple Watch’s second-quarter sales dropped 16% year-on-year, despite new battery sizes and improvements. Will the iPhone 7-era cellular model address that decline?

According to a DigiTimes report in March, in the June quarter Apple’s tablet shipments will fall by 20% year-on-year, and smartphones are expected to grow 4% year-on-year. Apple’s head of app updates, Eric Chiou, told the Verge’s Joshua Topolsky that Apple has “moved the needle” with its new dynamic random access memory (DRAM) processors for mobile devices, which boosts performance. It sounds like next-generation iPhones may be inferior to current iPhones. (If that happens, investors may be more bearish about the stock.)

Lastly, the bank Credit Suisse lowered its estimates for iPhone unit shipments for the current quarter, citing weak demand in Indonesia, Thailand, and Vietnam.

The company makes up 20% of the S&P 500’s (SPY) revenue and is over 50% of the consumer goods sector’s earnings, according to 10 Wall Street analyst organizations who keep track of their forecasts for the computer and technology sector. With the price of Apple shares down 15% in the past six months, valuation-watchers might question whether this is an overreaction.

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