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Apple (NASDAQ: AAPL) is expected to release fiscal first-quarter results on Thursday, and the tech giant’s quarterly report could give investors additional insight into how its supply chain is working and its impact. he had on the very important iPhone.
In November, Apple (AAPL) warned that COVID-19-related disruptions in China would lead to lower iPhone 14 shipments. Since then, Apple’s (AAPL) main iPhone maker Foxconn, also known as name Hon Hai Precision (OTCPK:HNHAF), suffered labor unrest and dealt with the impact of China’s COVID-19 policies, both of which led to a sharp drop in November revenue. A month later, Foxconn saw a sharp rebound in revenue in December as its main iPhone factory in Shenzhen, China, resumed normal operations.
Moreover, China effectively dismantled its COVID-19 policies that were hampering economic growth in the world’s most populous country, including easing travel restrictions.
An analyst consensus expects Apple (AAPL) to report quarterly earnings of $1.96 per share and $122.05 billion in revenue.
In addition to the state of the iPhone and its supply chain, Apple (AAPL) and its management, led by CEO Tim Cook, could give investors insight into consumer health as the global economic outlook continue to weaken and fears of a recession emerge.
Wells Fargo recently cut its estimate for 2023, citing the stock’s strong year-to-date rally and signs of “increasing weakness in consumer demand.”
“The overall surge in demand versus weakening consumer demand…and uncertainties about the pace of China’s post-COVID lockdown recovery leave us with an increasingly cautious stance until now. in 2023 – now [estimate calendar 2023 iPhone shipments] to 216.4M, i.e. -7% [year-over-year]about 10% below consensus,” analyst Aaron Rakers wrote in a note to investors.
Bank of America analyst Wamsi Mohan, who has a neutral rating and a $153 per share price target on Apple (AAPL), recently said the outlook for the March quarter could be very weak, perhaps be up to 20% higher than expected.
“The tone of the call will be crucial in understanding the underlying trajectory of demand given the [December quarter] Supply was significantly limited for high-end iPhone Pro models,” Mohan wrote in a note to customers.
Mohan added that his iPhone tracker shows that device availability has normalized “and leads us to conclude that demand may be weaker than expected in [the first-half of 2023].”
On the bright side, if Apple (AAPL) were to see further acceleration in services, due to the improving gaming backdrop and stable advertising, that would be a “net positive,” Mohan added.
Other bright spots could be less currency impact, China’s continued reopening and vertical integration progress as Apple (AAPL) continues to bring more components in-house, Mohan explained. .
Last month, Deutsche Bank cut its 2023 estimate for Apple (AAPL) ahead of the iPhone maker’s fiscal first quarter earnings release.