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'China iPhone sales likely to signal pressure': Here's what Wall Street expects from Apple's 1st-quarter earnings report

Matthew Fox   

'China iPhone sales likely to signal pressure': Here's what Wall Street expects from Apple's 1st-quarter earnings report
  • Apple is set to report its earnings for its first quarter after the closing bell on Thursday.
  • Investors will focus on the company's iPhone sales, growth of its Services unit, and commentary about its Vision Pro launch.
  • Here's what Wall Street expects to hear from Apple on Thursday.

Apple is set to report its fiscal first-quarter earnings after the market close on Thursday, and investors will be looking for solid results and strong commentary to justify its more-than 10% rally since the end of October.

iPhone sales in China, growth of its high-margin Services business, and commentary around this week's launch of the Vision Pro will be top of mind for Wall Street analysts during Apple's earnings conference call.

Here are the quarterly figures Wall Street expects, according to data from Bloomberg:

  • Revenue: $117.97 billion
  • Earnings per share: $2.11
  • Gross margin: 45.46%

Apple's fiscal first quarter is historically its strongest, as it encapsulates the holiday shopping season, which means the results could serve as an indication of consumer health. Apple is expected to return to revenue growth this year after lackluster iPhone sales in 2023, so analysts will closely examine guidance.

Here's what Wall Street analysts are saying about Amazon's upcoming earnings report.

Goldman Sachs: 'Setup for growth acceleration in F2H24'

Apple should deliver "in-line" results on Thursday, with much of the debate among Wall Street shifting to guidance, ongoing regulation issues, and the strength of the App Store, according to a recent note from Goldman Sachs.

The bank expects Apple to report earnings per share of $2.10, revenue of $117.4 billion, and gross margins of 45.0%, with iPhone revenue jumping 3% year-over-year thanks to the iPhone 15 lineup. But other product lines should see a decline in revenue growth.

"We expect double-digit revenue declines in iPad (-22% year-over-year) and Wearables, Home, and Accessories (-14%) on difficult year-ago comps that benefited from new product launches," Goldman Sachs said.

Meanwhile, the bank expects Apple's Services revenue to grow 11%, driven by recent price increases and a pickup in App Store sales.

"We'd expect Services revenue to benefit from increasing penetration of all services, particularly iCloud+ as data consumption growth outpaces device storage and AppleCare+ as devices become more expensive and the mix of direct sales (and opportunities to sell AppleCare+ directly) increases," Goldman said.

Goldman Sachs rates Apple at "Buy" with a $223 price target.

JPMorgan: 'Margins can move the stock'

Profit results should have a bigger impact on Apple's stock price than revenue, according to a recent note from JPMorgan.

"Premiumization of the iPhone with price mix tailwinds along with tight cost management are helping Hardware margins, and the mix change to Services will contribute further to the margin improvement which could drive upside to the gross margin guidance of 45%-46% outlined for F1Q24, particularly when keeping the volume leverage in mind," JPMorgan said.

The bank said investors should have largely moved past concerns about iPhone sales weakness, with recent data points such as Apple rising past Samsung to become the global market leader in smartphone shipments offering encouragement.

"With the robust sell-in volumes in F1Q24, current expectations from investors have moved to a modest beat led by robust iPhone numbers, even though accompanied on the flip-side by above-seasonal iPhone decline into F2Q," JPMorgan said.

JPMorgan rates Apple at "Overweight" with a $225 price target.

Wedbush: 'Another prove me moment for Cook and Cupertino'

Wedbush analyst Dan Ives said Apple will likely beat its first-quarter revenue and profit estimates on Thursday even with growing investor concerns about its iPhone sales.

"The big focus on the Street naturally will be on iPhone and double-digit growth for Services revenue which we both believe performed relatively well during the holiday quarter as the $68 billion iPhone revenue bogey and $23 billion Services estimate are hittable/beatable," Ives said in a note on Wednesday.

China iPhone sales, which represent about 20% of the company's total iPhone sales, will be a big focus on the earnings call as competition from Huawei increases — but according to Ives, sales trends have been steady.

"So far iPhone demand has been stable in China with some pockets of relative strength on the high end around upgrade opportunities along with some isolated weakness in the third party retail channel. We estimate ~100 million iPhones are in the window of an upgrade opportunity in China which has been a tailwind helping offset some of the Huawei competitive pressures in mainland China," Ives said.

Wedbush rates Apple at "Outperform" with a $250 price target.

Bloomberg Intelligence: 'China iPhone sales likely to signal pressure'

Apple's iPhone sales in China have faced several headwinds in recent months as weakness in the Chinese economy has become more apparent, and that could have an impact on Apple's first-quarter results.

"Apple's 1Q results will likely indicate iPhone sales pressure in the greater China region amid increased competition from Huawei and reduced consumer spending," Bloomberg Intelligence analyst Anurag Rana said in a recent note.

Rana also wrote that in addition to commentary about potential App Store changes due to regulations, investors will be eager to hear about progress in the launch of the Vision Pro. Rana estimates that Apple could generate $1.5 billion in Vision Pro sales this year.

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