Apple Q1 earnings: Revenues expected to contract as economic pressures build

When will Apple report their latest earnings?

Apple are expected to report their fiscal first quarter 2023 earnings (Q1) after market close on Thursday 2 February, 2023.

What should traders look out for?

Tech stocks have been hit hard over the course of the past year, with the highly elevated multiples associated with the sector bringing dramatic declines when earnings turn growth stocks into contraction. Apple treads the line between the tech services business and manufacturing, with the latter expected to suffer as inflation hurts both demand and margins. Despite these concerns, Apple has managed to maintain an upward trajectory for revenues which rose 8% for FY2022. However, market forecasts signal the potential for a year-on-year decline for both income and EPS this quarter.

As ever there will be a significant focus on iPhone revenues, which accounted for 52% of the company’s income last year. However, it is notable that iPhone and iPad sales were the two areas to have contracted last year. Holders will note that the services business continues to grow rapidly, rising 14% for FY22 to now provide almost 20% of the company’s revenue.

Chinese demand remains a key factor to consider, with the zero-Covid policy undertaken by Xi Jinping bringing significant pressure on demand and growth in the worlds second largest economy. However, with protests came a willingness to relax those rules. Investors will be looking out for any signs that Chinese demand has started to pick up off the back of this tough period.

Apple earnings – what to expect

Revenue – $122.05 billion vs $123.94 billion (Q1 2022), and $90.14 billion (Q4 2022).

Earnings per share (EPS) – $1.95 vs $2.10 (Q1 2022) and $1.29 (Q4 2022).

Apple earnings – valuation and broker ratings

Analysts are largely positive for Apple stock, with just one ‘sell’ recommendation out of 41. Of the remaining analysts, there are 33 ‘strong buy’ or ‘buy’ recommendations, while seven retain ‘hold’ ratings.

Apple shares – technical analysis

The weekly Apple chart highlights the downward trajectory seen over the course of 2022, with price recently falling back into an 18-month low. The subsequent rebound from trendline support looks to be simply providing another retracement, with the bearish trend still in play unless $157.03 is overcome.

The daily chart highlights this latest rebound, with price rising over the course of the past two-weeks. With the stochastic starting to turn lower from overbought territory, there is a strong chance that we see the bears come back into play before long. Of course, an ability to keep the company on a growth path for revenues would likely help maintain this upwards trajectory. However, there is a good chance that we see this stock weaken once again if economic pressures take a told on the bottom line.