The iPhone is likely the first thing that comes to mind when you think of Apple. Maybe a Mac would be better. More than $179 billion in cash and marketable securities is sure to conjure up mental images of a pile of money bigger than anything you’ve ever seen in a cartoon when you think of Apple’s financial situation. Apple is expected to take on a new role this Thursday, as a bellwether for the health of the American economy.
On Thursday, the California tech giant will reveal its financial results for the fourth quarter of its fiscal year, which covers the months of July through September. It doesn’t include the crucial months surrounding the holiday shopping season when Apple typically makes more money than many countries do in a year. However, it will also feature a couple of weeks of sales for the iPhone 14, along with the newest Apple Watches and the upgraded AirPods Pro.
For the global economy as a whole, the report could be a harbinger of good times. Many respondents to recent polls have formed the opinion that the global economy has entered a painful recession that could last for some time. While Russia’s ongoing war in Ukraine has contributed to artificially higher energy prices, lawmakers and business leaders are struggling to combat nagging inflation, which is now above 8%.
After having been relatively unscathed by the economic downturn, the technology sector is now feeling the effects. On Tuesday, Alphabet, the parent company of Google, reported third-quarter results that were lower than expected due to factors including foreign exchange rates and less spending from advertisers. The creators of Snapchat, Snap, informed shareholders last week that they were having similar problems, revealing a slowing in sales growth that scared investors.
The outlook may be similarly bleak for hardware manufacturers. According to market researcher IDC, “record-breaking inflation, geopolitical tensions, and other macroeconomic issues have considerably hampered consumer demand,” causing smartphone shipments around the world to fall by more than 6% this year, to 1.27 billion devices.
However, most analysts believe Apple has a chance of bucking the trend. According to Yahoo Finance’s average of analyst polls, investors can expect to see earnings of $1.27 per share from the company, which is an increase of around 2% from the same period last year. That would amount to $88.9 billion in sales, which is an increase of over 7% from the previous year.
Analysts caution that even then, there are more questions than answers due to idiosyncrasies in the financial cycle and concerning early holiday purchasing habits.
Toni Sacconaghi, an analyst at Bernstein Research, recently sent a note to investors expressing concern that “Apple may have been a Covid beneficiary, amid work/learn from home and strong consumer spending, which could reverse,” due in large part to shifting priorities in consumers’ discretionary spending.
He stressed the importance of Apple’s forthcoming statement regarding iPhone 14 sales. “Investors can anticipate Apple to be positive towards iPhone 14, but that optimism may or may not be indicative of the cycle’s eventual success,”
A representative from Apple did not provide any comment in advance of the company’s earnings report.
The Apple iPhone: An Overview
Concerns over Apple’s iPhone sales appear to be a constant source of anxiety among investors and observers of the tech sector. After all, sales of that one product category accounted for more than 50% of the company’s total revenues of $365 billion in 2017. As a result, it’s no wonder that market analysts closely monitor any data they can find on its sales performance.
Changes in production schedules are often made in response to news of fluctuating demand, which can come as frequently as once a week. The iPhone 14 Pro, which starts at $999 in the US, is rumored to be selling better than the iPhone 14 ($829) and iPhone 14 Plus ($930) this time around.
Despite worries about iPhone production reduction, “we continue to predict excellent iPhone results,” Evercore ISI analyst Amit Daryanani wrote in a note on Monday, citing his firm’s research and polls as evidence of robust demand.
Cowen Equity Research analysts have claimed that higher-priced “premium” handsets haven’t seen demand dip as much as other, cheaper devices, which is why some industry watchers are more optimistic about Apple.
Analysts at Morgan Stanley have stated that they do not expect anything Apple says on Thursday to “put to rest” any concerns of spending downturns among consumers, despite the fact that Apple may end up being a data point in the continuing debate over the health of the global economy.
Soon after Apple announces its quarterly profits on Thursday afternoon, the company will hold a conference call that will be broadcast live online and open to questions from analysts.
