Apple Q4 earnings preview: what next for the share price?

When is Apple’s results date?

Apple (AAPL) reports fiscal fourth quarter (Q4) earnings after the market closes on 30 October 2019.

What to expect from Apple’s Q4 earnings?

Beginning in the third week of October, Apple hit a series of new highs in the wake of the 'partial' trade deal announcement between the US and China. The stock had been weighed down by trade concerns – Apple supply chains are critically affected by trade tensions – through late August when Apple began to climb higher, breaking out on the announcement.

Apple management’s own guidance for fiscal Q4 is for revenues of $61 billion to $64 billion vs 2018 Q4 of $62.9 billion. The key gross margin figure – an indicator of profitability - is guided at between 37.5% and 38.5%.

Of critical importance for traders will be Apple’s guidance for the current quarter, fiscal Q1 for Apple. Earnings day will be the first peak at management’s view of prospects for what is by far the most important quarter for Apple as it includes the all-important holiday season.

How to trade Apple’s Q3 results

Traders should look for management to guide for growth in fiscal Q1 2020 – Q1 2019 revenues were $84.3 billion – as that will tend to underpin and confirm the new highs Apple has hit recently and possibly push the stock further into uncharted territory. The reverse possibly if management doesn’t guide for growth.

Analyst consensus is for Q4 revenues to come in at $63 billion, nearer the high of guidance. It’s important to note that the Q4 year-on-year (YoY) comparison is a tough one for Apple as sales soared 20% last year in the same period.

Watch out for Apple’s services segment

An important metric to focus in on for Apple, as always, iPhone sales is the biggest revenue segment. There is a lot of justifiable skepticism that Apple can keep the upgrade cycle going – iPhone sales fell 12% YoY in fiscal Q3. Its very newest phones seem to be moving, although the lowest priced phone is about $700 in the latest lineup. There was news recently, however, that Apple had ordered production increases for its iPhones.

Apple’s second-biggest segment now is providing services, sales of which are soaring at about a 50% rate. Wearables are rocketing too, which bodes well for the holiday season.

On the service side, Apple is a player in the increasingly nasty streaming service wars with its new $4.99 Apple TV+, the most price competitive so far of the slew of new offerings.

US corporate giants from Comcast to Disney are taking on streaming 800-pound gorilla Netflix. These deep pocketed media titans have identified steaming as crucial to their futures and, despite coming in late, seem prepared to spend whatever it takes to grab significant market share.

Price cutting may become common, and in fact has already started. Marketing budgets will likely soar. And there is a significant possibility that no one will win the war, and whoever does survive may come out severely wounded.

It is still unclear how far Apple is willing to go to keep its place in the streaming Big Boy Sandbox.