Apple’s holiday quarter may face inflationary pressures, but get the best iPhone boost

Apple Inc earnings report may show the best quarterly revenue growth for iPhones this year, but…

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Apple Inc’s earnings report on Thursday may show the best quarterly sales growth for iPhones this year, but it could still foreshadow a tough holiday season as demand in China slows and inflation is high for decades.

Analysts expect iPhone sales to rise 11% in the fiscal fourth quarter ended September, according to Refinitiv, thanks to consumers upgrading to the company’s premium-priced Pro phones. However, it is estimated that growth will slow to just 2% in the crucial holiday quarter.

The early days of the iPhone 14 product cycle have indicated low demand for base models and a strong appetite for the high-end variants, said Dan Morgan of Synovus Trust.

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Morgan added that he expected “the weaker consumer spending environment to affect the earnings trajectory”.

The latest earnings season has shown that even global tech giants, including parent company Google Alphabet Inc, are not immune to macroeconomic pressures as a strong dollar slows growth and companies pull back on spending.

Analysts believe Apple’s move to keep prices unchanged on its latest Pro models is fueling strong demand. The models also target affluent shoppers who are less vulnerable to inflation.

“The iPhone 14 Pro series has improved specs, but unit prices are the same as last year’s models, making pre-orders for the Pro series very popular,” said market research firm TrendForce.

CONTEXT

Analysts expect Apple to provide “guidelines” or an indication of iPhone 14 sales rather than a financial forecast.

The holiday quarter is typically Apple’s largest, accounting for about 30% of annual sales as it launches iPhones and Macbooks ahead of the shopping season.

MacBook sales are expected to fall 5% in the holiday quarter, after a likely increase of about 2% in the quarter ended September.

“We are concerned that Apple may have been a COVID beneficiary amid work/home learning and strong consumer spending, which could reverse, especially as consumer spending priorities change and rising rates may put pressure on demand,” Bernstein said. analyst Toni Sacconaghi.

The focus will be on Apple’s services business, where fourth-quarter revenue will rise 10% as the company plans to dial in its streaming service. While Apple TV has generated critically acclaimed hits, it lacks viewers from rival platforms like Netflix Inc.

RAW MATERIALS

* Fourth quarter revenue is expected to grow 6.7% to $88.9 billion; First quarter revenue is expected to grow 3.6% to $128.38 billion, the lowest growth rate for the holiday quarter since the pandemic

* Analysts predict fourth quarter earnings of $1.27 per share

WALL STREET SENTIMENT

* Of 43 analysts who rate the stock, 37 rate it as “buy” or higher, 5 “hold” and 1 “sell”

* The stock is down about 16% this year but still outperformed others in the trillion dollar club and those in FAANG.

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