Can Apple’s Earnings Boost Its Underperforming Stock?

Insights- Apple is set to release its fiscal Q4 2024 earnings after the U.S. market closes on Wednesday, October 31. Wall Street expects Apple’s Q4 revenue to increase by 5% year-over-year to $94.1 billion, with earnings per share growing 4.85% to $1.59.

Key Points to Watch

iPhone 16 sales and Apple AI are expected to be the primary focal points for the market.

Since its launch in September, concerns have arisen regarding the iPhone 16’s sales outlook and Apple’s future growth potential.

However, recent growth in the Chinese market has alleviated some of these concerns. According to data from Counterpoint Research, iPhone 16 sales in China grew 20% during the first three weeks of its launch. The new iPhone performed better than previous Apple models, with consumers increasingly opting for higher-priced models, Sales of the Pro and Pro Max models grew by 44% year-over-year. Additionally, Apple’s plan to continue integrating AI features into its iOS system next year may extend the iPhone 16’s adoption cycle.

Apple’s Apple Intelligence feature officially went live on October 28, coinciding with the release of iOS 18.1.

Additionally, subscription services, the second-largest revenue contributor after the iPhone, remain another key area of focus for the market. Since 2013, this segment has grown 6.56 times. Moving forward, with the integration of AI, the market is watching to see if subscription services can continue to drive Apple’s gross margin growth.

Some analysts point out that Apple’s subscription business is expected to grow steadily this quarter, providing support for the company’s Q4 performance.

Here Are the Analysts' Views

Since September, Apple’s stock has significantly underperformed compared to other major tech stocks and the S&P 500 index. Over the past month, Apple shares have gained less than 1%, hinting at market skepticism about the company’s earnings outlook, particularly regarding iPhone 16 sales.

On Monday, Jefferies maintained its "Hold" rating for Apple, with a target price of $212.92. The firm noted that delivery times for the iPhone 16 Pro and iPhone 16 Pro Max have shortened significantly in most markets and are now widely available, except in Japan. This observation suggests that current supply is adequately meeting what may be weaker-than-expected demand.

Goldman Sachs continues to maintain a "Buy" rating on Apple, with a target price set at $275, higher than the market’s average target price. Goldman believes Apple’s iPhone and services businesses will perform exceptionally well.