While shares of Apple (NASDAQ: AAPL) have performed admirably in 2022, given the ongoing carnage surrounding the equity market, it's still down 17% from all-time highs. Moreover, Apple stock entered bear market territory last month as investors are worried about lower consumer spending, rising commodity prices, and red-hot inflation data.
Apple's market cap stands at almost $2.5 trillion despite the pullback. The tech heavyweight has generated massive wealth for long-term investors and has surged 763.7% in the last decade after adjusting for dividends. Comparatively, the S&P 500 index is up 247% since July 2012.
The upcoming earnings results will be a crucial catalyst for Apple stock and will also provide Wall Street with a peek into the mindset and spending habits of the high-end consumer.
Apple is scheduled to report its earnings for fiscal Q3 of 2022 on Thursday, July 28th at 5:00 pm Eastern Time.
To listen to the call and access the earnings transcript, as well as the shareholder's letter and the company's financial statements for the quarter, all you need to do is go to Apple's investor relations page.
Let's see what Wall Street expects from Apple in fiscal Q3 of 2022 (ended in June).
Apple is among the most popular brands globally. It has a comprehensive portfolio of premium products that include the iPhone, iPad, and MacBook. In recent years, it has entered the wearable segment and sold millions of AirPods, and Apple Watches too. At the end of 2021, the total base of active Apple devices was close to 2 billion.
While the iPhone generates the majority of sales for Apple, the tech behemoth's Services business has gained massive traction in the last decade. In fact, the Services business now accounts for 20% of total revenue, bringing in $75 billion in sales in the previous four quarters.
However, global smartphone shipments are down in 2022. In Q1 of 2022, smartphone shipments fell 8% year-over-year to 326 million units according to data from Counterpoint Research. The decline in mobile units was attributed to headwinds such as inflation and lower consumer demand. It will be interesting to see if Apple's iPhone demand is also subdued in the near term.
Analysts tracking Apple stock expect the company to report revenue of $82.81 billion and adjusted earnings of $1.16 per share in fiscal Q3. In the year-ago period, Apple reported revenue of $81.4 billion and earnings of $1.30 per share. Despite an uptick in sales, an inflationary environment will likely drag profit margins lower in Q3.
Alternatively, Apple's iPhone shipments outpaced the broader market in the March quarter due to the strong adoption of its line-up of 5G devices. Further, due to its brand value, Apple enjoys pricing power and might continue to deliver stellar numbers for the June quarter.
Apple sales are forecast to rise by 7.6% to $393.5 billion in fiscal 2022 and 5.3% to $414 billion in fiscal 2023. Comparatively, its adjusted earnings are estimated to rise at an annual rate of 9.9% in the next ten years.
So, Apple stock is valued at 6.35x forward sales and 24.6x forward earnings, which is relatively high given an uncertain and challenging environment. But analysts remain bullish on Apple and expect shares to rise by 20% in the next 12 months.
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