Get ready – it’s almost time for the biggest player in tech to make its move. Tomorrow, after the market closes, Apple (NASDAQ:AAPL) will report its fiscal fourth-quarter (September quarter) earnings.
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Barclays’s Tim Long, an analyst ranked in the top 3% of Street experts, sees reasons for caution despite some positive factors.
While some favorable factors are in play, such as late-cycle iPhone 15 strength, better Services growth, and easing FX headwinds, these may partly offset weaker MacBook revenue, likely leading to “in-line to slightly better” September quarter results.
On the upside, iPhone revenue might surprise, as shipments could potentially exceed the expected 51 million units, helped by inventory buildup. Meanwhile, Services growth is projected at 13-14% year-over-year, edging above the consensus estimate of around 13%.
However, Long believes the focal point will be elsewhere: “We think Dec-Q guidance is the main event as this is the first full quarter of IP16 shipments.”
And here, given the mixed iPhone 16 data points and “increased news flow on build revisions,” Long takes a cautious stance. Having recently reported on semiconductor production cuts, Long says that now he’s hearing that companies further down the supply chain are also “lowering build expectations.” While recent checks on sell-through have been getting a “little better,” they still indicate a flat or declining performance vs. last year. Long reckons that wafer cuts and potential pushouts into 2025 could reduce total builds by up to 10%, believing Apple initially held a more optimistic outlook on iPhone 16 volumes following the June AI event. However, the actual sell-through appears to have been softer than expected.
“We now see more downside than upside risk to our Dec-Q estimate of 79 million units,” he goes on to say. “Weakness and cuts could also lead to lower shipments in the March and June quarters as well.”
Meanwhile, Apple Intelligence has just been released to US users with iOS18.1 but some highly anticipated features, including Genmoji and ChatGPT integration, won’t be launched until December. Additionally, the new Siri engine and expanded non-English language support won’t see a release until March 2025 at the earliest. “Therefore,” says the 5-star analyst, “we see near term AI features on phones being capped due to limitation on language availability and 3rd party app for Apple Intelligence API adoption.”
Bottom line, Long rates Apple shares an Underweight (i.e., Sell), along with a $186 price target, implying the stock is bound for a 19% decline over the coming months. (To watch Long’s track record, click here)
That’s a negative take but only one other analyst joins Long in the AAPL bear camp. With an additional 23 Buys and 8 Holds, the stock claims a Moderate Buy consensus rating. Going by the $247.32 average target, a year from now, shares will be changing hands for a modest 6% premium. (See Apple stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
