Apple (AAPL) is scheduled to report results for the company's first quarter of fiscal year 2019 after the market close on Tuesday, January 29, with a conference call scheduled for 5:00 pm ET. What to watch for:
1. NO MORE IPHONE UNIT DATA: Since the rise of the iPhone, unit sales of the device has been among the most, if not the most, closely watched metric reported by Apple. However, that will no longer be the case as the company announced with its last quarterly report that it plans to stop disclosing units for the iPhone, iPad, and Mac beginning with the upcoming quarterly report.
Apple has already warned about its results for this quarter, which may make the lack of iPhone data a bit less impactful for now as expectations have declined significantly over the quarter. Apple typically gives guidance on revenue and gross margins for the next quarter, from which analysts attempt to extrapolate a call on the company's expectations for iPhone sales, though it has never given guidance on iPhone unit sales expectations.
For the March-end quarter, which will be Apple's second fiscal quarter, the current revenue estimate is $59.28B.
In a preview of Apple's report, Morgan Stanley analyst Katy Huberty recently said she believes the bar has been set low, though Apple likely needs to deliver a "better than feared" revenue outlook for shares to recover further in the very near-term. Based on her talks with investors, she thinks the stock could trade up on revenue and gross margin guidance of $58B and 38% at the respective mid-points of the company's ranges. However, Huberty adds that either a 7-year iPhone replacement cycle or $450 average selling prices are priced into Apple's shares at current levels, both of which she views as "overly pessimistic." Given that she views either of those long-term iPhone scenarios as "unlikely," Huberty keeps an Overweight rating and $211 price target on Apple shares.
2. SERVICES: In Q4, Apple reported that its Services revenue grew to $9.98B from $8.5B in the same period of last year, representing year-over-year growth of 17%. Excluding a one-time favorable adjustment of $640M recognized in the fourth quarter of fiscal 2017, Services revenue grew 27%, Apple noted.
While Apple will stop disclosing unit sales figures, Jefferies analyst Timothy O'Shea noted that the company will now be disclosing Services gross margin for the first time ever, which he previously called a potential catalyst for the stock.
3. CHINA: When Apple lowered its Q1 revenue guidance to approximately $84B in early January from its previously provided view of $89B-$93B, the company said that economic weakness in some emerging markets, particularly Greater China, turned out to have a "significantly" greater impact on revenue than it had previously projected. Lower than anticipated iPhone revenue, primarily in Greater China, accounts for all of its revenue shortfall to its guidance and for much more than the company's entire year-over-year revenue decline, said the tech giant. Especially in light of continuing downbeat guidance from other companies about China, including this Monday morning's guidance cut from Nvidia (NVDA), Apple's update view on China will be a big factor in how its stock, and the market more broadly, reacts to the report.
4. RANGE BOUND?: JPMorgan analyst Samik Chatterjee said in a note to investors on Monday morning that despite low expectations heading into Apple's fiscal Q1 results, there is little likelihood that the company can address some of the major investor concerns just yet. As such, the stock price reaction to the quarter is "more likely to be range-bound," Chatterjee told investors. He believes buy-side expectations are already set quite low following Apple's preannouncement on January 2. However, he also sees "limited head-room" for Apple's fiscal Q2 guidance to surprise investors on the upside, given continuing headwinds to the consumer environment in China, elongation of the replacement cycle in most key smartphone markets globally, and pressures on selling prices from increasing trade-in values to drive volumes. Chatterjee kept an Overweight rating on Apple with a $228 price target.