Trick or treat, trick or treat, Apple (AAPL) needs to post an earnings beat.
The computer colossus is scheduled to report fiscal-fourth-quarter results on Halloween this year, and investors are hoping that some nice big numbers keep the ghosts and ghouls at bay.
Related: Analyst unveils Apple stock rating as iPhone 16 demand issue lingers
The company released the iPhone 16 late last month with great fanfare, which included Chief Executive Tim Cook meeting up with “Tonight Show” host Jimmy Fallon outside Apple’s flagship store in New York.
Apple is looking to use the iPhone 16 as a launchpad for a host of artificial-intelligence initiatives, dubbed Apple Intelligence, which are slated to be released soon as part of the iOS 18.1 update.
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However, some indications show iPhone 16 sales have not been scaring up the expected enthusiasm among consumers.
TheStreet’s Martin Baccardax reported early this month that presale estimates pointed to a more muted early response than Apple had hoped.
Apple CEO Tim Cook delivers remarks at the start of the Apple Worldwide Developers Conference June 10, 2024, in Cupertino, Calif.
Justin Sullivan/Getty Images
Apple analyst: ‘demand remains lackluster’
More recently, the Apple analyst Ming-Chi Kuo said on X that “demand for the 16 base model and 16 Plus remains lackluster compared to last year.”
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Kuo said that assembly orders remain virtually unchanged, with suppliers asking to continue producing two Pro models during China’s National Day holiday. The request does indicate that demand for the Pro models has generally met expectations so far.
The iPhone 16 Pro is more expensive than the standard iPhone.
“Some component orders for mid-November onwards have been slightly reduced (mainly for the 16 base model and 16 Plus), but by less than 3%-5%, which is essentially negligible,” Kuo said.
The analyst added that the 16 Pro’s shipments are similar to last year’s 15 Pro, “but it’s worth noting that the current shipping times for the 16 Pro are shorter than those of the 15 Pro.”
“The next focus will be the impact on U.S. market demand/shipments after Apple Intelligence becomes available in late October,” Kuo said.
“I maintain my previous production estimate for the iPhone 16 at 88 million-89 million units for 4Q24, slightly lower than last year’s 90 million-91 million units.”
Apple posted a stronger-than-expected fiscal third quarter in August, but iPhone revenue declined 1% from a year earlier, putting it at its lowest mark since the quarter ended September 2021.
The company’s shares are up 19% year-to-date and 28.3% from a year ago.
Analysts at JP Morgan said they were seeing some potentially good news for the latest iPhone.
The investment firm said on Oct. 14 that in the fifth week of its iPhone product availability tracker, it sees a repeat of trends from week four. “Resilience” of lead times indicates recovery in demand momentum for iPhone 16 Pro models relative to the initial weeks post launch, JPM said, according to The Fly.
Delivery lead times moderated less than typically for Pro Max models relative to prior product cycles, increasingly corroborating JP Morgan’s view of the initial weakness being an aberration, the analyst tells investors in a research note.
JP Morgan affirmed an overweight rating on the shares.
Analysts see Apple in good place
Meanwhile, a team of analysts at Evercore headed by Amit Daryanani added Apple to the firm’s Tactical Outperform List, stating that the company was well-positioned to clear a lower bar.
The firm maintained its outperform rating and $250 price target.
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Evercore’s analysts said Apple is in a good place to outperform against low expectations in the September quarter and, more important, on the December-quarter guidance.
The analysts said that sentiment on Apple has turned more bearish in recent weeks and they think buyside expectations are likely lower than current consensus estimates.
Against this background, they expect Apple to deliver results in line with current analyst estimates, which would help the stock move up.
Bearish investors remain focused on the Chinese smartphone market. But the analysts say the risk here is overstated and can be offset by growth in developing markets and by a strong upgrade upgrade cycle in the U.S., where Evercore’s survey indicates strong upgrade demand, driven in part by AI.
The country’s smartphone market increased 10% year-over-year to reach 67.9 million unit shipments in the second quarter on the back of a robust 618 shopping festival period, according to Counterpoint Research. This refers to a shopping festival created by e-commerce giant JD.com (JD) and celebrated on June 18.
Apple’s shipments registered a marginal decline in Q2 2024, but iPhone 15 Pro and Pro Max contributed around half of Apple’s sales, signifying Chinese consumers’ preference for the Pro model, Counterpoint said.
Evercore’s team said that Huawei Technologies is the main threat in China. Evercore said that Huawei reportedly continues to struggle with securing sufficient chip supplies and is competing largely against the lower end of the iPhone lineup.
The root cause of the issue, the firm said, was the continued impact of the four-year-old U.S. ban on the supply of chip manufacturing tools to Huawei and Semiconductor Manufacturing International.
Evercore also said its outlook on Apple’s Wearables and Services segments was bullish.
The release of new products such as the Apple Watch, Watch Ultra, AirPods 4, and USB-C AirPods Max is expected to significantly accelerate wearables revenue in the December quarter.
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