Apple Faces Earnings Test Amid AI and China Market Concerns
Embattled tech giant Apple will face investors’ scrutiny on Thursday after the bell, as it announces its fiscal second-quarter earnings. The company’s performance in 2024 has been lackluster, with shares declining about 11% year to date. Declining iPhone sales in China and the cancellation of its electric car project have cast a shadow over Apple’s prospects.
Analysts expect Apple to report earnings of $1.50 per share and revenue of $90.01 billion for the quarter. Despite the company’s recent struggles, several Wall Street analysts remain optimistic about the stock. Bernstein analyst Toni Sacconaghi believes that Apple’s guidance could provide a positive catalyst for the stock, similar to previous earnings reports.
China Demand and iPhone 16
Investors will be listening closely to Apple’s management team’s comments on China demand. China represents a significant market for Apple and also dominates its supply chain. A recent drop in iPhone sales in China has raised concerns for investors. Bernstein remains optimistic that the weakness in the China market is cyclical rather than structural.
Apple is expected to unveil the iPhone 16 this fall, and analysts believe it could drive a resurgence in demand. Oppenheimer analyst Martin Yang believes that the release of the iPhone 16 could offset some of the weak demand trends in China. TD Cowen’s Krish Sankar sees growth in underpenetrated markets like India as a potential counterbalance to the challenges in China.
AI Updates
Several analysts believe that promising updates on Apple’s generative AI features could help the stock rebound this year. Apple’s Worldwide Developers Conference (WWDC) in June is likely to provide major updates on the company’s AI strategy. JPMorgan’s Samik Chatterjee sees the current pullback in Apple’s stock price as an attractive entry point ahead of a potential rebound from an AI upgrade cycle.
Citi expects sales in the previous quarter to come in below estimates and remains conservative on iPhone demand in 2024. However, the firm believes that unit demand could rise as Apple rolls out generative AI features. TD Cowen’s Sankar also expects an AI strategy rollout at WWDC to be a major catalyst for Apple’s stock.
All eyes will be on Apple’s earnings report on Thursday evening. The company’s guidance, China demand updates, and AI strategy announcements will be closely scrutinized by investors as they assess the company’s future prospects.
