It’s a big week for Apple (NASDAQ:AAPL) stock. Tim Cook & Co. are scheduled to release Apple’s fiscal third-quarter earnings report Tuesday, where analysts expect Apple to report earnings of $2.10 per share on $53.39 billion in revenue.
If these forecasts hold up, this means the company’s sales are largely flat from a year earlier. Some even expect Apple to post its third quarterly revenue decline in its fiscal year, which would mark its first three-peat loss since 2001.
The company has hit some recent headwinds, including the trade war with China, declining iPhone sales and a lack of enthusiasm for its upcoming streaming service.
Yet, in spite of these challenges, Apple stock is up 10% from a year earlier and 33% year to date. Here are four things you should be watching for in its next earnings report:
New iPhone Cycle
The iPhone is the company’s strongest source of revenue. This has caused an issue with investors as iPhone sales have been dropping in recent quarters.
In February, the company saw its biggest sales decline in three years. The company’s global market share slipped to 16%, largely due to declining sales in China. These problems have been largely outside of Apple’s control.
The iPhone is not going to appeal to budget-conscious consumers. And most consumers that already own an iPhone aren’t interested in upgrading for only minor improvements. Apple is due to release the next iPhone in September, and on Tuesday investors should learn more information about it.
Apple’s Services
To an extent, Apple accommodated declining iPhone sales with its services business. This includes the App Store, Apple Pay, Apple Music, the company’s cloud services and more. These services accounted for 20% of Apple’s revenue during the fiscal second quarter.
These services generally do well because any customer who purchases an iPhone, Macbook or iPad automatically receives access to these services and subscriptions.
Most recently, the company introduced the new Apple card and the Apple+ streaming service. CEO Tim Cook has indicated that the company plans to launch additional services in the future.
Apple’s Investments
Apple stock generates up to $60 billion in free cash flow and the company continues to invest heavily back into the business. The company plans to $10 billion on data centers over the next five years and it continues to open up new stores across the country. And most recently, Intel (NASDAQ:INTC) agreed to sell its smartphone-model business to Apple for $1 billion.
This is important because it demonstrates the health of the company not just today but years from now. When the company releases its earnings report, it will be interesting to see what future investments the company plans to make.
Whether Growth Is Weak, Better Than Expected
Recently, many analysts have adopted a bearish attitude when it comes to the company. So Apple stock prices could rise if the company’s earnings report is even slightly better than expected. If the company can beat expectations and raise its guidance for the fiscal fourth quarter, this could give AAPL stock the boost it needs.
As of this writing, Jamie Johnson did not hold a position in any of the aforementioned securities.
