A-Day is early Wednesday, Sydney time, just after 6am when Apple releases a much anticipated March quarter results which go a long way to either settling an anxious Wall Street, or spark another sell-off.
Apple’s report will dominate a week that sees the US March quarter earnings season starting to slow, with retailers, media and a few drug groups to report this week and next (around 150 S&P 500 companies are due to report).
There’s nothing in that lot to help the market, so it will be up to Apple. Its iPhone sales might be weaker, but investors might be surprised on the upside by higher sales revenues because of the more expensive X phone, and rapidly rising revenue from services, such as Apple TV, Apple Music and the App Store.
Some analysts feel those two factors could actually help Apple more than many gloomy investors believe.
Something is needed to give the market a positive lift – record results from Netflix the week before and Alphabet (Google), Facebook and Amazon last week failed to shift sentiment and providing a lasting lift. In fact the S&P 500, the key market measure, closed flat over the week.
That was despite those very sold results, especially from Facebook and especially Amazon.
Investors now widely believe that Apple will report weak sales for the quarter – in its December quarterly report it estimated March quarter sales at between $US60 billion and $US62 billion.
The December quarter with Christmas, Thanksgiving and big sales around the world is the company’s biggest sales period. In 2017 Apple. For the that quarter, Apple shipped 77.3 million iPhone smartphones worldwide, for $US61.6 billion in sales.
Unit sales of iPhones were down 1% compared with 78.3 million in the year-earlier quarter, while revenue rose 13%. That quarter though was a week shorter than the previous corresponding quarter.
Analysts have been busy cutting estimates for iPhone sales (especially the X model) since mid March. For example Goldman Sachs slashed its Apple iPhone sales estimates in late March for the first two quarters of the year.
It expects now expects iPhone sales of 53 million units in the March quarter and 40.3 million units in the three months to June. Wall Street estimates for iPhone sales for the quarter range from 48 million to 54.5 million.
A bigger fear for Apple and investors that the4 Chinese government retaliate against the company (and some of its US peers) in the trade dispute with the Trump Administration, which has already taken action against Chinese tech companies. A Chinese ban or action against Apple would have a bigger impact on the market than this result will have.
FactSet pointed out over the weekend that so far this reporting season, 79% S&P 500 companies that have reported beat forecasts, but the better-than-expected results have often failed to lift individual share prices.
Reuters reported that “estimated S&P 500 profit growth for the first quarter has risen since the start of the reporting period and is now on track to rise 24.6%, the strongest year-over-year growth since the fourth quarter of 2010, according to Thomson Reuters data.
That is thanks largely to changes in the US tax law that slashed the corporate tax rate to 21% from 35%.
The tax cuts have failed to boost US share prices. The S&P 500 is flat since April 13, when JPMorgan Chase kicked off the March quarter earnings season, and the index is down about 7% from its January 26 high and down 0.14% for the year to date.
That is something to keep in mind for the coming week when reports will come from around 150 S&P 500 companies.
This include Apple, McDonald’s, Aetna, Merck, Garmin, Yum Brands, Estee Lauder, Kraft Heinz, PG&E, the New York Times, CBS, ADM, Merck, Pfizer, Mondelez, Tesla, Snap, Kellong, DowDuPont and Berkshire Hathaway, which reports after the close on Friday and then holds the most famous annual meeting in the world in Omaha on Saturday.
