Apple Inc has "pre-announced" grim second quarter earnings guidance, repeating a tactic it took when it pre-announced disappointing Q1 2019 results a few months ago. Its own guidance says Q2 sales will be down from the same time last year.
As a result of this discomfiting heads-up, analysts will be looking to see how much of a hit Apple will take in Q2 as a result of a startling decline in iPhone sales in China. In Q1, Apple said its key holiday quarter revenue will be $7 billion short of its previous projection because of tanking iPhone sales in China.
In advance of the forthcoming Q2 guidance, Morgan Stanley forecast 42 million iPhones sold compared to the 52 million iPhone's sold during the same quarter in 2018. Other analysts concur that iPhone unit sales are likely to decline year-over-year in Q2.
According to Refinitiv consensus estimates, here's what we might see come Tuesday:
Earnings per share: $2.36 compared to $2.73 in 2018
Revenue: $57.41 billion as against $61.13 billion in 2018
Despite this string of bad news, Apple's shares are surprisingly up 43%. Last week, several Wall Street analysts upgraded their price targets for the stock. That's because Apple is no longer a one trick pony relying on one product (the iPhone) for most of its sales (in this case 60 percent).
Apple is unmistakably diversifying into online services with recurring billing, so Apple deserves to be priced more like Amazon, Google, or Facebook, said some analysts.
By announcing three new online subscription services in an invitation-only event in March, and a co-branded credit card with Goldman Sachs, Apple underscored the many new revenue streams it stands to profit from. Apple has also doubled the number of paid online services this year.
Eagerly awaited is news about the Apple + streaming TV; how well it's and other info that underscore its services business is growing quickly. The only info on the $10 per month service so far is that 200,000 people signed up in the first 48 hours it was available.
Analysts said this event helped investors start to "think about life after iPhone."
"Investors have bought hook-line-and-sinker into the notion that services revenue is going to be a fast growing number for Apple," said Tom Forte, D.A. Davidson analyst.
Morgan Stanley said it believes investors still don't fully appreciate the strength of Apple's platform with iOS users more engaged with mobile services and spending 10 times Android users on mobile apps.
