Apple earnings preview

Investor focus is on the sales performance of the new iPhone released near the end of the quarter and the impact of a higher dollar on the bottom line.
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There's been some foreshadowing

Last week, it was reported that Apple cut production of its flagship product just a couple of weeks after its launch. Though that should be contextualised within the comments from the CFO during the conference call following the Q2 earnings release, saying he expected higher revenue. Which isn't the same as increased unit sale volume, considering the new iPhone is priced higher.

Meanwhile, another issue of concern ahead of earnings is that Microsoft also reported a drop in PC sales, which could indicate that buyers are feeling the pinch of inflation and aren't shelling out for new gadgets. The higher price point of Apple products might make it more vulnerable in
that context. Particularly given the reliance on the Chinese market, where consumer confidence has been lagging due to the effects of covid.

To the future

Apple is expected to report a marginal increase in Q4 earnings to $1.27 from $1.20 last quarter. Sales are also likely to be just a bit higher at $88.7B. However, Apple's first fiscal quarter is the most important for the company, with sales jumping for the holiday season.

Since 2020 Apple hasn't been providing guidance. However, it gives some indications of what to expect in the coming quarters. The focus will likely be on services revenue, which the CFO warned would slow down this quarter. Service growth has far outstripped growth in phone and
tablet sales. The question is whether the company can capitalise on freer supply chains to improve margins.

Apple at 1-month high

Apple's share price has recently hit a 1-mont high at 152.This has been the third peak since the low of 133 on Oct 12, resembling a rising wedge. For the pattern to prevail, the short-term pullback currently at play must remain above the second lower-high at 141. Ideally, the 147 retest will tilt probabilities to the upside.

If or when the share price breaks the upper trendline in this context, Apple might advance to 165 (R1). Above there lies 171 (R2), the leg of the pattern's height measured from the lower-low to the third peak at 152. Maintaining the momentum might send prices to 176 (R3), a multi-month top. However, if the low at 141 (S1) is lost, 133 (S2) will be in closer proximity and might attract both bears and bulls. If the later cohort succumbs to pressure, 129 (S3) is significant support recorded on June 16.

Key takeaways

Apple's revenue might take a hit because the production of its new iPhone was cut short. Combined with signs of a drop in sales, this could indicate that people are holding off on buying new gadgets due to inflation, particularly given Apple's reliance on the Chinese market. Apple is
expected to report slightly higher earnings and sales, but the real focus has always been the first fiscal quarter. The firm hopes to improve Service growth margins by capitalising on freed supply chains.