Apple Inc. (AAPL) Stock Not Getting the Benefit of the Doubt Headed Into Earnings

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In many ways, forming an opinion about how well consumer technology giant Apple Inc. (NASDAQ:AAPL) did in its recently completed quarter is a lot like handicapping the current Presidential race — if you look hard enough, you’ll find enough data to support your hope.

Unfortunately for owners of Apple stock, hope won’t change the reality of the numbers slated to be posted after the closing bell rings on Oct. 25. Although many of the qualitative assessments are encouraging, a little too much of the quantitative data suggests fiscal Q4 (calendar Q3) was a tough one for the company.

AAPL Stock Earnings Preview

As of the most recent look, Apple is expected to report earnings of $1.65 per share on sales of $46.89 billion for its fiscal Q4, ending on Sept. 25. Both would be down from year-ago figures of a profit of $1.96 per share of Apple stocks and revenue of $51.5 billion.

Apple had offered revenue guidance of between $45.5 billion and $47.5 billion for the quarter in question.

Not that it’s the only product it sells, but its popular iPhone still makes up the bulk of its total revenue … about 56% of its total sales a quarter earlier. Analysts collectively believe Apple sold 44.6 million of the device last quarter, 43% of which were driven by sales of the new iPhone 7 and iPhone & Plus even though the device was only available for the final two weeks of the quarter.

Apple sold 48 million iPhones in the fourth fiscal quarter of 2015.

Getting a Bead on iPhone Demand

Getting a feel for how well the iPhone has sold since its Sept. 16 launch date has been even more torturous than usual for owners of AAPL stock this time around. For the first time in years, Apple made a conscious decision to not release sales figures for the initial-weekend debut, saying it was “no longer a representative metric for our investors and customers.”

Translation: A lack of supply is the biggest culprit for any sales weakness (though such an impasse is difficult to swallow with Tim Cook — who was hailed as an operational genius — at the helm).

Of course, Apple’s lack of specifics didn’t prevent analysts from doing their own digging, and coming up with their own conclusions. S&P Global Market Intelligence senior equity analyst Angelo Zino was one of them. He opined that, despite the phone’s presence in more countries than the second-generation of the iPhone 6 reached at launch time a year earlier, iPhone sales for fiscal Q4 would be down by a single-digit percentage on the heels of an estimated 13 million unit sales for its first weekend.

Piper Jaffray analyst Gene Munster was a bit more optimistic, estimating Apple sold 14.3 million iPhone 7 smartphones during its opening weekend, up 10% from the launch of the iPhone 6s a year prior, setting the pace for unexpectedly strong demand.

A couple of red flags were raised in the meantime, however.

One of them was trouble in China, which had recently been generating about a fourth of Apple’s revenue. UBS analyst Steven Milunovich and Asia telecom analyst Jinjin Wang recently noted that iPhone 7 sales have been weaker than they were for the iPhone 6s, as that country’s consumers have opted for Chinese brands. There’s also the small problem that a “perceived lack of innovation for the 7 has made users hesitate to upgrade.”

The other red flag? Last week, Apple supplier Laird PLC (OTCMKTS:LARRF) cautioned that its full-year profits would be alarmingly lower than last year’s. A significant slowdown in sales of smartphones was cited as the reason.

Though it matters considerably less than the iPhone 7, MacBook shipments look like they fell 13% year-over-year for the previous quarter.

Of course, timing must also be considered for any AAPL stock holders worried the previous quarter was a lackluster one. As Gene Munster recently explained, “We continue to believe that the limited supply of the iPhone 7 should be positive for the Dec quarter outlook as demand shifts from September to December,” and even with the September quarter’s headwind, Munster is looking for $47.5 billion worth of fiscal-Q4 revenue for the quarter.

Bottom Line for Apple Stock

As much as everyone is watching the numbers, Apple is still more about the rhetoric and perception than it is about results. It’s also the market’s most-watched name, with most everyone holding a strong opinion … one way or another.

Don’t be shocked or spooked if AAPL overreacts to Tuesday’s news after the bell. That should cool off soon enough.

Either way, Apple stock is in the rare position of being “prove it to me first” name.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/10/apple-inc-aapl-stock-benefit-doubt-ipmedia/.

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