The most anticipated earnings of this quarter by the biggest technology behemoth are expected to be reported on Tuesday after the bell. Apple, Inc. (NASDAQ:AAPL) reports its fourth-quarter earnings today and all eyes are now glued to the AAPL stock. Apple stock investors want to know how the company and the stock will fare after tonight. Here’s my take on it.
Apple has a history of reporting conservative numbers which it goes on to beat quarter after quarter. Apple management usually doesn’t give away long-term forecast figures but instead goes by quarter-to-quarter guidance. This helps curb analyst estimates from going out of bounds, making it easier for Apple to meet Wall Street’s expectations. Here’s a quick overview of what analysts are expecting and where the earnings and revenue estimates stand compared to the last quarter (Q3 2015) and the same quarter last year (Q4 2014).
|Analyst EPS Estimate||$1.88|
|EPS Growth YoY||32.4%|
|Revenue Growth YoY||21.4%|
|Earnings Beats in Last 4 Quarters||4|
Apple has had a promising track record of beating analyst expectations; it has done so consecutively for the last 11 quarters and will likely do so today. This is despite the fact that more analysts have revised down their EPS estimates this quarter than the contrary. The biggest reason behind their revisions has been the hullabaloo over the Chinese market slowdown which, as we know now, is unwarranted.
The biggest player in the Chinese market that generates over two-thirds of its revenue from China, Alibaba Group Holding Limited (NYSE:BABA), reported stellar earnings and revenue figures this morning and has put my fears to rest. I’m hopeful that Apple’s sales numbers out of its biggest growth market will be equally, if not more, stellar. The company saw a massive 112% growth in the last quarter alone when the troubles in China were peaking.
Another key move that will prove a boon to Apple’s success this quarter is its iPhone Upgrade Program. A good 27% of its installed customer base before the launch of iPhone 6 and 6 plus had already upgraded in the third quarter. The upgrade program created a room for more upgrades this quarter. The company sold 13 million units of the latest iPhone 6 and iPhone 6 plus units in the launch weekend alone. The total number of sold iPhone units is expected to stand close to 49 billion, a 24% year-over-year (YOY) growth.
Albeit small, I see an additional valuable contribution from Apple Watch to this quarter’s earnings. Despite competition from wearable fitness tracking devices from Fitbit Inc. (NYSE:FIT) that are quickly growing popular, Apple delivered great Apple Watch sales figures during the third quarter. The Apple Watch was released in April this year and despite a weaker initial reception than what analysts expected, the demand exceeded supply in Q3.
The only real headwind I see is the negative impact of stronger greenback compared to the lately devalued yuan. Unfavorable foreign exchange currency translations may cause a minor dent in its net numbers but Non-GAAP figures will still be very handsome.
Where is AAPL Stock Headed?
The AAPL stock is down from its last quarter highs but is still up 5.44% year-to-date and has far beaten the S&P 500 this year.
Chart courtesy of www.StockCharts.com
The company provided a guidance revenue range of $49.0 billion to $51.0 billion and I see it beating it beyond the upper end of the range. The company’s strong brand recognition as well as its growing stronghold over the local and emerging markets bode well for the stock in the long run. Apple’s Project Titan is the next big bombshell under its belt, which is expected to send the AAPL stock skyrocketing when it’s revealed.
Bottom line; investors shouldn’t fall for the negative sentiment driven by Apple bears. The future of AAPL stock is very promising.