What to expect from Apple's upcoming earnings
This quarter is typically Apple's slowest. Apple sells a lot of iPhones during the holiday season and much fewer in the first calendar quarter of the year.But investors will still be looking for slight annual growth, as well as any sign that Apple expects the redesigned iPhone coming out this fall to be a hit.Advertisement
On the other hand, the historically strong dollar caps Apple's earnings upside.
Here's what Wall Street expects from Apple's key earnings figures, via Bloomberg:Q2 EPS: $2.022, up 5.9% year-over-year
Q2 revenue: $53.079 billion, up 4.9% year-over-year.Gross margin: 38.711%iPhone unit sales: 52.21 million (compiled by Philip Elmer-DeWitt)Advertisement
Apple forecasts between $51.5 billion and $53.5 billion in sales in this quarter. Ultimately, 39 analysts rate Apple stock as a "buy," 9 rate it as a hold, and only one says to sell, according to Bloomberg.
Here are some key questions that analysts want answered:
How does Apple see the upcoming iPhone "Super Cycle?"Advertisement
Analysts want to hear if Apple CEO Tim Cook or CFO Luca Maestri give any perspective on whether Apple sees this as a real possibility or how the company is preparing for substantial demand.
"Over the course of the next year, we continue to believe that an iPhone 8 Super Cycle (starting with 3 models, one of which will be OLED) should drive up replacement rates and drive new customers," Credit Suisse analyst Kulbinder Garcha wrote in a note last week.
Will Apple increase dividends?
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Apple had $246.1 billion in cash and marketable securities and $87.5 billion in debt at the end of last quarter, according to Drexel Hamilton analyst Brian White.
"Exiting [the holiday quarter], Apple had used nearly $201 billion of the $250 billion that is targeted to be returned to shareholders by March 2018," White writes.Aside from Apple's annual capital return update, some analysts will want to hear what Apple would do if there is corporate tax reform and it can repatriate some of the $230 billion or more it has overseas. Advertisement
"Potential catalysts for Apple during 2017 include a falling corporate tax rate and repatriation of over $200B from cash balances offshore," Needham analyst Laura Martin wrote last week.
Is the iPhone 7 selling well?
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"As it relates to Apple, we suspect U.S. sell through trends have weakened," Raymond James analysts wrote last week. "We ... expect a more muted outlook overall for the next two quarters. However, we suspect Apple's shares are largely discounting sluggish near term U.S. trends as investors look forward to the next iPhone launches this fall."
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"This continued expansion of Service's contribution to Apple's business has resulted in a higher quality, annuity type business. We believe as this business continues to grow, the stock could continue to rerate as a result. Current stock price has reflected the upcoming iPhone cycle to some extent," Credit Suisse analysts recently wrote.
Business Insider will be covering Apple's quarterly earnings live on Tuesday afternoon.Visit Markets Insider for constantly updated market quotes for individual stocks, ETFs, indices, commodities and currencies traded around the world. Go Now!Advertisement
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