Apple Inc. (AAPL) - Get Report shares edged modesty higher Thursday as investors prepped for the company's critical fourth quarter earnings report after the close of trading that will answer some testing questions related to the impact of the U.S-China trade war and its forecasts for the holiday season.
Apple is expected to post earnings of $2.78 per share over the three months ending in September, the final quarter of its fiscal year, on overall group revenues that could reach a record $61.6 billion. Apple is also expected to have shifted more than 48 million iPhones, which makes up more than 56% of net sales, over the three-month period. That's only 2% higher than the same period last year, but a boost in the unit's average selling price, which could rise to as high as $751, as new products such as the iPhone XR hit key markets.
Apple shares were marked 0.26% higher at the opening bell Thursday to change hands at $219.43 each and a move that extends the stock's year-to-date advance to nearly 30%.
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Apple's iphone sales, however, could surprise to the upside, as new iPhone XS and XS Max demands appears to have been healthy near the end of the September quarter -- about ten days of XS sales were recorded during the quarter -- and Apple ended the June quarter with iPhone channel inventories near the low end of its target range.
Services revenue, which includes App Store, Apple Music, iCloud Storage and Apple Pay, will also be in focus in the after-the-bell update, after segment revenue rose by an impressive 31% in the June quarter to just under $10 billion.
Analysts are looking for something in the region of $10.44 billion for the fourth quarter, a figure that will likely comprise a smaller overall contribution to total net revenues. While the dollar's recent strengthening and the lapping of the one-year anniversary of what appears to be a more favorable deal with Google could affect Services growth a bit, that consensus still looks beatable.
Apple's fortunes in China, however, could be a weak spot for the tech giant, which became the first listed company in the world to reach a market value of $1 trillion earlier this year as part of the stock's incredible 92% gain over the past two years.
China accounted for around 10% of its global revenues over the third quarter, down from around 18% over the three months that ended in December of last year, thanks in part to stiffer competition from lower-priced rivals such as Samsung Electronics (SSNLF) and Huawei.
Oppo, for example, China's second-largest handset maker, unveiled a €999 ($1,320) unit called the FindX while its domestic rival, Vivo, is marketing a $780 smartphone called the Nex.
That said, Strategy Analytics, a closely-watched industry benchmark, sees global handset sales only rising by 1.4% by the end of the year to 1.49 billion units, although 5-G network rollouts in 2019 and beyond should reignite appetite in the near-term.
Apple's China sales may also be impacted by both a weakening yuan, which fell 3.8% against the dollar to the lowest level in ten years over the September quarter, and any consumer blowback related to the ongoing trade war between Washington and Beijing, which has sparked tariffs on billions worth of goods but has so far spared Apple's products and supply chain.
Earlier this month, analysts at Goldman Sachs cautioned of "multiple signs of rapidly slowing consumer demand in China which we believe could easily affect Apple's demand there this fall", creating concern that the group's fourth quarter earnings, due on November 1, may indicate weakening iPhone demand amid a slowing global handset market.
Goldman, which is holding to forecasts of 80 million in iPhone shipments over the three months ending in December, nonetheless cautioned that "should weak consumer demand persist and impact the higher end of the market Apple's potential to beat and raise in FQ4'18 earnings is likely reduced."