Apple's next quarterly earnings report comes out on Tuesday, and there's plenty that investors will be looking for updates on as it's been an eventful period for the company and a positive year for Apple's stock on the whole.
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Analysts polled by FactSet are expecting earnings of $2.09 per share on sales of $53.3 billion, on average. Below are a few key themes to watch when Apple reports on Tuesday, July 30 after the close.
1. Intel on Intel
Last week, Apple announced an acquisition of the majority Intel's (INTC - Get Report) smartphone modem business, to the tune of $1 billion. Apple's chip ambitions have been known for some time, but Tuesday's call is an opportunity for investors to hear more details about the integration of Intel's modem business. In a recent note, Loup Ventures' Gene Munster forecast that we won't see the first Apple modem until 2022; but if successful, the freedom from Qualcomm (QCOM - Get Report) chips will yield greater efficiencies and cost savings: "Starting in 2023 this could save Apple about $2B per year in licensing fees paid to Qualcomm (assuming royalty of approximately $8 per device), and increase Apple's gross margin by just under 1% (38.1% to 38.8%)," Munster wrote.
2. Services Updates
iPhone are Apple's present, but services represent its future in the eyes of many analysts. The tech giant is preparing to roll out a slew of new services, including Apple TV+, Apple Arcade and a credit card in partnership with Goldman Sachs (GS - Get Report) in the coming weeks and months. Reportedly, Apple plans to introduce the new credit card in the early part of August, with the rest of the new services expected this fall. While Apple probably won't go into extensive detail about any of these individual offerings, investors are eager for any evidence of how the services might perform, how they'll affect Apple's overall business, and what else lies in store for Apple customers. Possibilities include new healthcare-focused initiatives for Apple Watch, further forays into financial services and moves into the automotive space.
3. iPhone Demand
Apple is due to release a new lineup of iPhones this fall, but 5G phones -- viewed as an important future catalyst for iPhone sales -- aren't coming until 2020. In the meantime, investors are continuously taking the temperature of iPhone demand globally: "Our recent checks suggest stable iPhone demand globally heading into the crucial September quarter with some puts and takes that overall we would characterize as 'better than feared' in light of a very noisy time for Cupertino," wrote Wedbush's Dan Ives in a recent note. Meanwhile, China sales and trade concerns -- the source of much of Apple's woes over the past year -- still represent a "wild card" for Cupertino, he added. Investors will also look for signs that Apple's fortunes in China, while far from ideal, have at least somewhat stabilized. Apple, for its part, will likely continue steering the narrative away from unit sales, a metric it abolished late last year, and toward services.
4. Antitrust Scrutiny
A government antitrust inquiry into Apple is likely to focus on one issue in particular: The 30% cut it takes from developers for App Store transactions. It's not the only source of pressure on Apple's take rates: Developers have increasingly complained that the cut is excessive, and in May, the Supreme Court sided with a group of developers seeking to bring an antitrust suit against Apple for the fees.
Tom Forte of D.A. Davidson wrote earlier this month: "This is an important revenue stream for the company; especially as Apple seeks to diversify its revenue from today's over-reliance on smartphone hardware sales. Our view today is that there may be pressure on the take rate from government intervention, but at this time it is difficult to estimate to what degree." Still, he added that the regulatory risk could have a significant impact on the stock -- so investors will be keeping their ears tuned for more details on Tuesday.
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