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This Is A Sign That Apple Will Crush Fiscal Q1 Earnings

Only a few days ahead of earnings day, one report suggests that Apple will likely deliver strong holiday quarter results. Here is what investors should know.

Apple stock  (AAPL) - Get Apple Inc. Report continues to slowly recover from its 2022 low of $172 per share. Justifying modest bullishness may be mounting evidence that the Cupertino company is likely to deliver strong results in the holiday period, which is its fiscal first quarter of 2022.

Below, we review the latest piece of data suggesting that earnings season will likely be a positive for Apple — and, perhaps, for its stock as well.

Figure 1: View from inside of an Apple store.

Figure 1: View from inside of an Apple store.

(Read more from the Apple Maven: AAPL vs. AMZN: Jim Cramer Picked The Right One)

Mac segment looks good

Earlier in January, a report of improved iPhone and MacBook lead times surfaced. The news, shared by less-than-bullish Goldman Sachs analyst Rod Hall, suggests that the supply-demand dynamic for these products has gotten better, despite the lingering global supply chain crisis.

But perhaps a more convincing argument supporting strong performance in fiscal Q1 came more recently from Canalys. The research shop reported that Apple shipped 7.8 million PCs in the holiday quarter, for a YOY growth rate of 9% (see below).

From a growth perspective, the Cupertino company performed best among the top 5 PC vendors. Because of it, the company’s market share increased from 7.9% this time last year to 8.5% now, narrowing the still wide gap to the top three makers Lenovo, HP and Dell.

Figure 2: Worldwide desktop, notebook and workstation shipments (market share and annual growth).

Figure 2: Worldwide desktop, notebook and workstation shipments (market share and annual growth).

Not reflected in the unit shipment numbers is the potential (likely, I would say) increase in average selling price. Apple has been refreshing its lineup of Mac devices since the introduction of the M1 chip, in November 2020.

With the higher-end models seeing the architecture upgrades first, it is possible that average prices will lean higher as demand for the Pro devices benefits the most.

The importance of the Mac

To be fair, the Mac segment alone should not be enough to make or break Apple’s holiday quarter. If anything, the iPhone is the only category still able to have a major impact on financial performance, as it accounted for around half of Apple’s revenues last year.

Still, the Mac could be a key factor in driving a potential earnings beat at the end of January and, therefore, have an impact on investor sentiment. As the chart below suggests, Apple’s PC division has been facing tough comps in the past couple of quarters.

Strong results here could represent upside to fiscal Q1 estimates. Currently, consensus calls for revenue growth of 5% in the holiday quarter (the Mac is very likely to outperform this number by a good bit) and EPS of $1.88 that would be 12% higher YOY.

Figure 3: Mac growth.

Figure 3: Mac growth.

Twitter speaks

Analysts think that Apple will grow revenues by 5% and EPS by 12% in fiscal Q1, to be reported in a couple of weeks. What do you think of these estimates?

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Apple Maven)