Apple stock set for recovery or takedown after earnings report?

“After the bell on Tuesday, we’ll get fiscal first quarter results from technology giant Apple,” Bill Maurer writes for Seeking Alpha. “While a number of the period’s figures are already mostly known given the company’s surprising warning, there are still questions to ask regarding the situation in China and iPhone weakness.”
“If we look at current estimates, the street expects revenues of $84.04 billion and earnings per share of $4.17. That would be a top line decline of almost 5% but EPS growth of more than 7%,” Maurer writes. “The main reasons for the difference in those two rates are the company’s massive buyback along with this being the last calendar quarter where Apple has a much lower tax rate as compared to the prior year period thanks to the US tax cuts of late 2017.”
“The biggest indicator of Apple’s progress will be guidance,” Maurer writes. “The street average [Q219 revenue expectation] is currently at $59.28 billion, a decline of about 3% over the prior year period… I’d think good guidance implies a revenue midpoint around $60 billion, but I’m afraid we’ll be short of that. I’d be a bit worried if we see the midpoint come in at say $58 billion or even lower. If that happens, I believe shares get hit again, especially considering their strong recovery from recent lows.”
“We also will likely see investors become a bit more positive on Apple as we move closer to the April/May earnings report, which is when we get an annual update on the company’s massive capital return plan,” Maurer writes. “While the $20 billion a quarter buyback pace doesn’t look so good currently thanks to the fall in shares, it should mean a better dividend raise this year thanks to an impressive reduction in the share count. With around $130 billion in net cash, Apple is still well positioned to return plenty of capital to shareholders, while still being able to make acquisitions and invest in the company’s future.”
Read more in the full article here.
MacDailyNews Note: On January 2, 2019, Apple CEO Cook provided the following guidance:
• Revenue of approximately $84 billion
• Gross margin of approximately 38 percent
• Operating expenses of approximately $8.7 billion
• Other income/(expense) of approximately $550 million
• Tax rate of approximately 16.5 percent before discrete items
We expect the number of shares used in computing diluted EPS to be approximately 4.77 billion.
As usual, we will bring you Apple’s results and the all-important Q219 guidance as soon as they are released, right around 4:30pm ET tomorrow, January 29th and follow up with live notes from Apple’s conference call will analysts starting at 5pm ET.
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Apple CEO Tim Cook issues public letter to investors, lowers guidance – January 2, 2019