What to Watch for in Apple Inc.’s (NASDAQ/AAPL) Earnings Report

Apple Stock To WatchApple Inc. (NASDAQ/AAPL) is due to release its quarterly earnings report on July 21st after market close. Here are a few things that investors should watch for in the report.

Strong Growth Expected

Analysts are expecting strong growth for Apple in the reporting quarter. Revenue is expected to be $49.26 billion, a 31.6% increase year-over-year. Adjusted earnings-per-share are expected to be $1.80, up from $1.40 in the same quarter last year.

Note that Apple’s last earnings report was pretty solid; with revenue and net profit surging 27% and 33% year-over-year respectively. However, the company’s stock price did not move much upon the announcement.

Analysts will pay particular attention to the company’s performance in China. For the quarter ended March 31, 2015, sales in greater China (mainland China, Hong Kong, and Taiwan) increased 71% year-over-year to $16.8 billion. It was also the first time for iPhones sales in greater China to be greater than in the U.S.

Not all products are enjoying strong growth, though. In the previous quarter, iPad sales declined 23% year-over-year as the tablets market got more crowded. It was possible that Apple’s own iPhone 6 and iPhone 6 Plus were eating into sales of the iPad due to their increased size.

Apple Watch

The most interesting number to watch would be the sales of the Apple Watch. Since the product was released in April, this would be the first time for its sales to be published.

The path for the Apple Watch has not been that smooth. In April, The Wall Street Journal reported that one of the key components of the Apple Watch—the taptic engine—was found to be defective. It was less intrusive than ringing or buzzing to get the user’s attention. Production slowed down as a result of the defect.

Analysts have also pondered around potential sales numbers of the Apple Watch. Research firm Slice Intelligence estimated that Apple had sold 2.79 million units of the Apple Watch by mid-June. (Source: Reuters, June 18, 2015.) Later on, however, the research firm estimated that orders for the Apple Watch had declined 90% from the week of its launch. (Source: Business Insider, July 20, 2015.)