Earnings look ahead — Apple

Apple is expected to report a healthy earnings growth. The stock has been relatively immune from the recent sell-off, indicating that investors expect good growth from the smartphone titan.

Apple iStore
Source: Bloomberg

Apple earnings are scheduled for 1 November, and the firm is expected to report a 34% rise in headline earnings per share (EPS), to $2.78, while revenue is forecast to rise 17% to $61.4 billion. It has beaten estimates in all of the last eight reports for earnings, and beaten revenue estimates in six of the last eight.

Apple has seen its growth slow in recent years, with an average earnings growth of 5% for the past three years, and sales up by an annual average of 3%. Margins remain solid, with an operating margin of 26.6% and profit margin of 28%. This time around, the company needs to provide guidance on how sales in China are faring following the steep devaluation of the yuan over the past six months. This will make iPhones more expensive, relative to domestic smartphones, potentially hurting sales.

Watch out for services growth, the crucial new element driving Apple forward. Revenues rose 31% in the last quarter and are expected to be up 20% this time around. In addition, keep an eye on average selling prices for iPhones, after the last quarter saw a rise of $118 in the average price of an iPhone.

Compared to the rest of the market, Apple stock has been quiet, declining steadily without dropping off a cliff. This kind of strength vis-à-vis the broader tech indices and the S&P 500 itself should be encouraging. October’s record high is only a short distance away, with a breakout above $220 opening the way to fresh gains. Support is possible around $208.

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