Apple, Inc., the American multinational technology company, specializes in designing, manufacturing, and selling various products and services. This includes smartphones (iPhone), personal computers (Mac), tablets (iPad), wearables and accessories (Apple Watch, Airpods, Apple Beats), TVs (Apple TV), and related services (iCloud, digital content stores, streaming, licensing services). The company is set to release its Q4 2023 earnings results on November 2nd after the market closes. With its market capitalization at over $2.6 trillion, there are uncertainties surrounding whether Apple can deliver satisfactory results.
In the previous quarter, Apple reported $81.8 billion in sales revenue, which was slightly down by -1% compared to the same period in the previous year. The iPhone, Mac, and iPad categories experienced a decline in sales revenue from Q3 2022. iPhone sales revenue reached $39.7 billion (-2.5%), mainly due to a slowing economy. Mac sales revenue was $6.8 billion (-7.3%), and iPad sales revenue was $5.8 billion (-19.8%), which was affected by strong competition following the introduction of the new iPad Air. However, these losses were partly offset by the Service category, which saw an increase of over 8% to $21.2 billion, driven by over 1 billion paid subscriptions. Subscriptions more than doubled over the past three years. The company also experienced a 2% growth in revenue in the wearables category, reaching $8.3 billion. Operating income slightly decreased to below $23.0 billion, but the company’s net income still managed to increase by 2% to $19.9 billion, thanks to controlled spending. Additionally, the company’s operating cash flow remained solid, with over $24 billion being returned to shareholders.
Despite limited availability of the iPhone 15, Apple ranked second in the global smartphone sales race for Q3 2023. Counterpoint predicts that the full impact of the iPhone 15 series will be realized in the coming quarter. Sales events in China and India, as well as end-of-year promotions, are expected to put a halt to year-over-year declines. Apple’s digital services, including the App store, Apple Pay, Apple Card, Apple TV+, Apple Music, and iCloud, had over 1 billion paid subscribers, a increase of 150 million over the past year and nearly double the number from three years ago. The company expects continuous growth in this category in the upcoming quarters. Apple has also been incorporating AI technology to enhance the functions of its devices, such as iPhones and watches, aiming to improve product quality, increase user satisfaction, and maintain competitiveness. This investment in AI and software engineering is expected to increase R&D costs to approximately $1 billion per year.
The consensus estimate for sales in Q4 2023 is $90.3 billion, a 10% increase from the previous quarter. If the reported figure aligns with this forecast, the total sales revenue for FY 2023 will reach $384.5 billion, a slight decrease of nearly $10 billion from FY 2022. The expected EPS for Q4 is $1.36, a 10 cent increase from the previous quarter and a 7 cent increase from the same period last year. The forecast for FY 2023 EPS is $5.99, slightly lower than the previous year’s $6.11.
From a technical analysis standpoint, Apple’s share price hit an all-time high in July at $198.21 before undergoing a correction in its bullish trend that started in early January. It last closed below the 38.2% Fibonacci retracement level at $170. The 100-SMA intersects with the 50.0% Fibonacci retracement level at $161, serving as the nearest support to watch. A successful break below this level may indicate more selling pressure, with the next target at $152 (61.8% Fibonacci retracement level). Both the MACD and RSI indicators suggest a declining bullish momentum.
