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Should You Buy Apple (AAPL) Stock Ahead of Earnings?
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Shares of Apple (AAPL - Free Report) popped over 1.8% on Monday in a sign that many investors might be anticipating strong quarterly financial results from the technology bellwether. Let’s take a look to see what they should really expect.
Apple stock had dipped 3.25% over the last month before Monday’s pre-earnings release surge. Shares of Apple are still up nearly 13% over the last year. But Apple is no longer the massive growth company that it once was, with fellow tech powers Amazon (AMZN - Free Report) , Facebook , and Netflix (NFLX - Free Report) now leading that charge.
With that said, investors are also seemingly more concerned than ever about Apple’s iPhone dependence. Last quarter, iPhone sales accounted for 70% of Apple’s total revenues. Of course, Apple did still report an eye-popping $88.29 billion in Q1 revenues, which marked a 13% climb from the year-ago period.
Now, with this brief preamble out of the way, let’s dive into some key estimates and fundamentals before Apple reports its second quarter earnings results after market close today.
Latest Outlook
Apple’s quarterly revenues are projected to climb by 15.5% to hit $61.1 billion, based on our current Zacks Consensus Estimates. At the other end of the income statement, Apple’s adjusted earnings are projected to surge by over 28% to reach $2.69 per share.
Of course, top and bottom line growth estimates are just two of the many things investors will be concerned with when Apple reports. Luckily, we can turn to our exclusive non-financial metrics consensus estimate file. The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. The data is acquired from digest and contributing broker models and includes the independent research of expert stock market analysts.
Based on our latest consensus estimates, analysts expect Apple’s total iPhone unit sales to hit 52.94 million, which would represent a 4.3% climb from the 50.76 million iPhones Apple sold in the year-ago period. Meanwhile, Apple’s total iPhone revenues are projected to climb by 18% to reach $39.22 billion.
Investors might also be pleased to note that Apple’s Services revenues—which includes iTunes, Apple Music, AppleCare, and Apple Pay—is also expected to pop by roughly 18% to hit $8.33 billion.
Earnings ESP Whispers
Moving on, investors will also want to understand what chance Apple has to surprise investors with better-than-expected earnings results. For this, we turn to our Earnings ESP figure.
Zacks Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst estimates. This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.
In contrast, a stock with a Zacks Rank #3 (Hold) or worse, coupled with a negative Earnings ESP, is one investors typically want to avoid during earnings season.
Apple is currently a Zacks Rank #4 (Sell) and sports an Earnings ESP of -0.23%. Therefore, AAPL is a stock that could miss quarterly earnings estimates.
Surprise History
Apple’s earnings surprise history and the effect that these surprises have had on its share prices are two other important factors to consider ahead of the iPhone giant’s earnings report.
The company has posted strong earnings results recently, topping quarterly estimates in the trailing seven periods. More impressively, Apple has fallen short of quarterly earnings estimates just once since the start of 2014. However, these beats haven’t always led to positive momentum immediately following Apple’s quarterly earnings release.
We judge the price effect of these earnings beats by comparing the closing price of the stock two days before the report and two days after the report. Apple stock has turned negative in four out of these last 10 windows, despite posting just one actual earnings miss.
Bottom Line
Investors can clearly see that Apple is a stock that could fall short of quarterly earnings estimates, which could extend its recent decline. The company will also be under further pressure to impress during an earnings season that hasn’t always rewarded strong bottom line beats.
Remember to pay particularly close attention to Apple’s iPhone unit sales, Services revenue, and growth in key Asian regions.
Make sure to check back here for a complete breakdown of Apple’s Q2 financial results after market close today.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Should You Buy Apple (AAPL) Stock Ahead of Earnings?
Shares of Apple (AAPL - Free Report) popped over 1.8% on Monday in a sign that many investors might be anticipating strong quarterly financial results from the technology bellwether. Let’s take a look to see what they should really expect.
Apple stock had dipped 3.25% over the last month before Monday’s pre-earnings release surge. Shares of Apple are still up nearly 13% over the last year. But Apple is no longer the massive growth company that it once was, with fellow tech powers Amazon (AMZN - Free Report) , Facebook , and Netflix (NFLX - Free Report) now leading that charge.
With that said, investors are also seemingly more concerned than ever about Apple’s iPhone dependence. Last quarter, iPhone sales accounted for 70% of Apple’s total revenues. Of course, Apple did still report an eye-popping $88.29 billion in Q1 revenues, which marked a 13% climb from the year-ago period.
Now, with this brief preamble out of the way, let’s dive into some key estimates and fundamentals before Apple reports its second quarter earnings results after market close today.
Latest Outlook
Apple’s quarterly revenues are projected to climb by 15.5% to hit $61.1 billion, based on our current Zacks Consensus Estimates. At the other end of the income statement, Apple’s adjusted earnings are projected to surge by over 28% to reach $2.69 per share.
Of course, top and bottom line growth estimates are just two of the many things investors will be concerned with when Apple reports. Luckily, we can turn to our exclusive non-financial metrics consensus estimate file. The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. The data is acquired from digest and contributing broker models and includes the independent research of expert stock market analysts.
Based on our latest consensus estimates, analysts expect Apple’s total iPhone unit sales to hit 52.94 million, which would represent a 4.3% climb from the 50.76 million iPhones Apple sold in the year-ago period. Meanwhile, Apple’s total iPhone revenues are projected to climb by 18% to reach $39.22 billion.
Investors might also be pleased to note that Apple’s Services revenues—which includes iTunes, Apple Music, AppleCare, and Apple Pay—is also expected to pop by roughly 18% to hit $8.33 billion.
Earnings ESP Whispers
Moving on, investors will also want to understand what chance Apple has to surprise investors with better-than-expected earnings results. For this, we turn to our Earnings ESP figure.
Zacks Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst estimates. This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.
In contrast, a stock with a Zacks Rank #3 (Hold) or worse, coupled with a negative Earnings ESP, is one investors typically want to avoid during earnings season.
Apple is currently a Zacks Rank #4 (Sell) and sports an Earnings ESP of -0.23%. Therefore, AAPL is a stock that could miss quarterly earnings estimates.
Surprise History
Apple’s earnings surprise history and the effect that these surprises have had on its share prices are two other important factors to consider ahead of the iPhone giant’s earnings report.
The company has posted strong earnings results recently, topping quarterly estimates in the trailing seven periods. More impressively, Apple has fallen short of quarterly earnings estimates just once since the start of 2014. However, these beats haven’t always led to positive momentum immediately following Apple’s quarterly earnings release.
We judge the price effect of these earnings beats by comparing the closing price of the stock two days before the report and two days after the report. Apple stock has turned negative in four out of these last 10 windows, despite posting just one actual earnings miss.
Bottom Line
Investors can clearly see that Apple is a stock that could fall short of quarterly earnings estimates, which could extend its recent decline. The company will also be under further pressure to impress during an earnings season that hasn’t always rewarded strong bottom line beats.
Remember to pay particularly close attention to Apple’s iPhone unit sales, Services revenue, and growth in key Asian regions.
Make sure to check back here for a complete breakdown of Apple’s Q2 financial results after market close today.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>