With Apple Stock At All-Time Highs, Will Q4 Earnings Deliver?

Apple (NASDAQ:AAPL) is expected to publish its Q4 FY’24 results on October 31, reporting on a quarter that saw the company launch its latest iPhone 16 devices. Apple stock has had a good run this year, rising by about 23% since early January, with the stock now trading near all-time highs. We expect revenue to come in at $94.5 billion, up about 13% year-over-year, while earnings are likely to come in at $1.56 per share, about 15% ahead of last year’s number. Both our estimates are slightly ahead of the consensus. See our analysis of Apple Earnings Preview for a closer look at what to expect when Apple publishes results.

Apple’s iPhone business could see some growth this quarter. According to estimates from IDC, Apple shipped 56 million iPhones in Q3 CY2024, up 3.5% year-over-year, although its overall smartphone market share declined a bit. While growth is likely to be driven in part by the new iPhone 16 lineup, which went on sale about 10 days before the quarter closed, the last generation iPhone 15 was likely the biggest driver of sales, amid considerable promotional offers and buzz surrounding Apple’s latest software updates. However, the iPhone has been facing headwinds in China, one of its largest markets amid higher competition from the likes of Huawei, who has been gaining ground in the high-end of the market.

Apple’s Greater China revenue for the first nine months of the fiscal year was down almost 10% compared to the year-ago period. Apple’s Mac business could have a tough quarter, as customers likely held off on purchases and wait for newer models with the latest upgraded M4 processors.  Apple’s digital services business should fare well, driven by higher sales at the AppStore and improving the uptake of other subscription services. Over Q3 FY’24, services sales grew 14% to $24.2 billion.   See our breakdown of Apple’s services business revenues.

The increase in AAPL stock over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 35% in 2021, -27% in 2022, and 49% in 2023. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could AAPL face a similar situation as it did in 2022 and underperform the S&P over the next 12 months – or will it see a strong jump?

We value Apple at about $219 per share, which is slightly below the current market price of about $236. Apple stock trades at about 35x FY’24 earnings, which is elevated compared to historical levels. However, Apple should see revenue growth pick up from the next fiscal year, driven by the introduction of new generative AI offerings that are only compatible with the company’s latest devices – a move that could drive an upgrade cycle for consumers with legacy iPhones and iPads. Apple’s margins should also continue to remain strong. Gross margins came in at 46% for the first nine months of this fiscal year, reaching near all-time highs, up from about 44% in the year-ago period, driven by a more favorable product mix, and a higher percentage of service sales. See our analysis of Apple Valuation for more details on what’s driving our price estimate for Apple and how it compares with peers. See our upside case for Apple How Apple Gets To A $5 Trillion Valuation

[1] Returns as of 10/23/2024
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates