The second quarter of the year is never a great one for Apple, but this year is shaping up to be worse than usual.
Apple is reporting quarterly earnings on Tuesday. The company’s own guidance forecasts that revenue will be down from the same time last year.
Last year during this quarter, typically Apple’s slowest, the company generated $49.6 billion in revenue. CEO Tim Cook says Apple will do $41 billion to $43 billion in revenue in the quarter this year.
Wall Street is primarily trying to figure out how many iPhones the world’s most valuable company has sold – Apple could notch its second straight quarter in which iPhone sales declined year over year.
Apple sold 47.5 million iPhones last year during the same quarter.
The Street expects Apple to post $42.11 billion in revenue and earnings per share of $1.38, according to Yahoo Finance.
We’ve collected forecasts and insights from a few Wall Street analysts covering Apple. Check out the opinions below:
“There probably won’t be too many positives in the quarter”: Steven Milunovich and Benjamin Wilson (UBS)
While UBS analysts are still generally bullish on Apple, they don’t see too many “positive catalysts” in the short term.
Milunovich and Wilson predict that Apple will also see its margins shrink as Apple’s new low-cost iPhone option, the SE, has been more popular than expected.
The analysts do think that Apple’s service revenue – stuff like the App Store and Apple Music – will be strong.
Ultimately, they think Apple has an “annuity business model delivered as hardware hits” and that it is “increasingly important to recognize Apple as a platform company.”
In a follow-up note, Milunovich writes that the “iPhone 7 could perform like the iPhone 6S in the US.”
“451 Research asked how likely consumers are to buy the iPhone 7. Responses showed interest levels similar to the iPhone 6s. Only 8% were ‘very likely’ and 17% ‘somewhat likely’ to buy the iPhone 7. In the survey last June, 8% responded ‘very likely’ and 16% ‘somewhat likely’ to buy the iPhone 6s.”
Revenue estimate: $41.6 billion
“Our opinion is that Apple has peaked under the leadership of CEO Tim Cook”: Colin Gillis (BGC Financial)
In Gillis’ view, there is even more risk for the iPhone 7 than the iPhone 6S, which has seen slow sales.
“Our view that that there is risk that the upgrade rate for the next iPhone may slow even more than the upgrade rate cycle of 6s, which has been materially lower than the upgrade rate of the iPhone 6 as per the company,” he wrote, according to Bloomberg.
He is one of the most bearish analysts on Apple, setting its price target at $85 and rating it “sell.”
“Sentiment on Apple is at one of the lowest, if not the lowest, it’s been since we’ve been covering the company”: Maynard Um, Munjal Shah, and Jason Ng (Wells Fargo)
Wells Fargo analysts believe that because Apple expectations are so low, there’s significant upside to the stock.
They predict that if Apple reveals a “positive data point” during next week’s call, Apple stock could rally.
They’re also looking to the long term and believe that iPhone shipments will start to grow again by the end of the year.
Revenue estimate: $42.7 billion
“Apple is continuing to trade at an attractive valuation for long-term investors”: Aaron Rakers, Joseph Quatrochi, Andrew Shinn (Stifel)
Stifel analysts reduced their estimates of iPhone sales for the rest of 2016 earlier this month.
Still, they’re bullish on Apple. They believe that given Apple’s installed base, a lot of people will be looking to upgrade their phones in the next year.
“While we are reducing/de-risking our forward iPhone shipment expectations … our iPhone installed base analysis leaves us continually constructive on post-iPhone 7 potential upside.”
Revenue estimate: $41.33 billion
“We are lowering our estimates on a lower gross margin view”: Tim Long (BMO)
BMO analysts are neutral on Apple in the short term because they think the iPhone SE will cut into Apple’s profit margins.
However, they think that Apple will ship more iPhones than the Street’s consensus this year and that there’s upside this fall when the iPhone 7 comes out.
“Last month, on the heels of our trip to Asia, we raised iPhone unit numbers for the June and September quarters to 42 million and 44 million, respectively, above consensus of 40 million and 43 million. We maintain our view that the iPhone 7 will be a solid performer given the increased iPhone installed base and higher percentage of old phones. This quarter, we believe gross margins will likely be more impactful for the near-term stock movement.”
Revenue estimate: $43.72 billion
“We like the set-up”: Katy Huberty, Jerry Liu, Elizabeth Elliott (Morgan Stanley)
Morgan Stanley’s Huberty is one of the sharpest Apple analysts out there, and her team largely expect Apple to report “in-line” results.
She thinks that iPhone growth “likely troughed” already and that there’s a chance for growth later this year as well as next year.
Her team writes:
“Investors will increasingly look forward to the 2017 iPhone cycle. We see several potentially revolutionary features, especially in display and battery life, that Apple could launch in just over a year from now. Similar to the first large screen iPhone, the 6 in 2014, investors anticipate a meaningful product launch at least a year ahead of time.
“As iPhone growth troughs in the June quarter and as gross margin expectations are reset this earnings season, we think Apple sentiment should improve going forward.”
Revenue estimate: $41.9 billion
“Apple is a relative safe haven”: Laura Martin and Dan Medina (Needham)
Needham’s research largely surrounds the possibility that Apple’s platform could start to generate significantly more revenue, focusing on the hit game Pokémon Go, which is putting money into Apple’s coffers.
In general, Needham analysts believe that although a hit product provides an upside for Apple, a lot of alternate revenue streams could start to be material – including Apple Pay, Apple’s enterprise revenue, and Apple Watch.
They rate Apple as a “strong buy” with a target price of $150 – way higher than other target prices from other analysts.
“In the context of today’s chaotic global macro environment, AAPL’s $153B of net cash gives it the ability to survive most macro disruptions and the flexibility to execute strategic choices. Negative leverage (i.e., net cash) is safer (and therefore more valuable) in a volatile market.”
Revenue estimate: $43.2 billion
“We look through uninspired F3Q results to a better FY17”: Jeffrey Kvaal and Gregory McNiff (Nomura)
Nomura’s research focuses on Apple’s efforts to become more of a platform – a talking point for Cook recently.
They believe that although iPhone sales numbers will “look uninspired,” Apple can continue to make money from its installed base of iPhones. They believe that Apple’s services business will post 20% growth this year.
Still, they are worried that Apple’s new cheap iPhone will still hurt margins.
From the note:
“We have argued that SE demand has exceeded Apple’s expectations, in part at the expense of 6s volumes. SE supply caught demand at the end of F3Q. The SE strength should change the shape of F3Q/4Q volumes (we model 42mn/42mn vs. consensus 40mn/43mn) and lower ASPs (we model $584/$599 vs. $612/$618). Consensus has come down modestly ahead of F3Q results, which implies that investor expectations are catching up.”
Revenue estimate: $43.1 billion
“Sentiment has clearly worsened, but with more downside than upside to current estimates, we remain cautious near term”: William Power (Baird)
Baird analysts are fairly bullish on Apple, although they rate the stock as outperform.
They focus on Apple’s foreign exchange problems with the strong dollar, something that Cook touched on earlier this year when he called conditions “unprecedented.”
“Currency pressure likely. With roughly two-thirds of Apple’s revenue generated outside of the US, the company could face increased currency headwinds.”
Revenue estimate: $42.1 billion
“We are not excited about the growth outlook for iPhone”: Birdy Lu and Frank Lin (Deutsche Bank)
In a longer note about Apple’s supply chain, Deutsche Bank analysts wrote they believe that Apple suppliers are still a strong bet.
They also go into “industry checks,” which indicate that “product mix has worsened” with Apple’s new low-cost iPhone.
Looking forward to the iPhone 7, they think it could outsell the iPhone 6S, but Apple appears to be making fewer iPhone 7s.