Apple earnings preview

Tech giant Apple is scheduled to report its fiscal third-quarter results on Tuesday after the US markets close.

Apple continues to struggle through a rough patch, with its shares lodged below $500 since January (and substantially below for the most part: it’s trading at around $427 today) after hitting its all-time high (above $700) last September.

After Google and Microsoft disappointed the market last week, the NASDAQ really needs one of its big names to deliver. The trouble is that Apple has failed to impress the market the last three times that it has reported.

Analysts surveyed by Reuters expect Apple to report earnings of $8.16 per share on revenue of $37.8 billion. That would be a small increase in revenue from the $36 billion of sales in the same period last year and a drop from the $8.67 per share earned in that quarter. Another vital metric when it comes to Apple is gross margin. In the same quarter in 2012, the company’s margin was 40%. 36.8% is expected this time.

Declining gross margins and earnings may not sound too rosy, but that could all be counterbalanced if there are any interesting products in the pipeline. We can pretty much count on a new iPhone for the autumn and new iPads and iPad minis are likely. There have been rumours of a cheaper iPhone to allow the company greater penetration in emerging markets and an iWatch has long been mentioned.

The trouble with a cheaper iPhone is that, although it could help boost revenue, it would undermine those profit margins further. An announcement of a release-date for an iWatch seems unlikely given Apple has only just started hiring in this area, but an official confirmation that they intend to release one eventually is a possibility.

More concrete and still vitally important is the sales performance of the iPhone, and to a lesser degree, the iPad. Sales of 26.5 million iPhones is expected. Interestingly Verizon Wireless reported better-than-expected sales of the iPhone in its quarterly report last week with 3.87 million handsets shifted (it sold 4.1 million in the first quarter of the year). The iPhone made up roughly 51% of all smartphone activations by Verizon Wireless in the period, a big increase from 2012.

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