Apple Set to Report Q4 Earnings: Buy, Sell or Hold the Stock?

Apple AAPL is set to report its fourth-quarter fiscal 2024 results on Oct. 31.

Apple expects fourth-quarter fiscal 2024 revenues to grow at the same rate as of the June quarter on a year-over-year basis. Unfavorable forex is expected to hurt revenues by 1.5%.

Apple’s third-quarter fiscal 2024 net sales increased 4.9% year over year to $85.78 billion.

The Zacks Consensus Estimate for fiscal fourth-quarter revenues is currently pegged at $94.43 billion, indicating growth of 5.51% year over year.

The consensus mark for earnings is currently pegged at $1.54 per share, down 3.75% over the past 30 days. The figure indicates a 5.48% increase from the year-ago quarter.

Apple Inc. Price and EPS Surprise

Apple Inc. price-eps-surprise | Apple Inc. Quote

AAPL’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the earnings surprise being 3.79%, on average.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Let’s see how things are shaping up prior to this announcement.

Apple’s iPhone Sales Likely to Climb in Fiscal Q4

Apple’s fortunes are heavily reliant on the iPhone, which is by far its biggest revenue contributor. The device accounted for 45.8% of net sales in the third quarter of fiscal 2024, wherein sales decreased 0.9% year over year to $39.27 billion.

The Zacks Consensus Estimate for fiscal third-quarter iPhone net sales is pegged at $45.656 billion, suggesting 4.2% year-over-year growth.

AAPL’s Services Growth to Remain Steady in Fiscal Q4

The steady growth of the Services segment is expected to boost top-line growth. An expanding paid subscriber base has been a key catalyst for the Services business, which is riding on the increasing popularity of the App Store and an expanding installed base of devices, albeit with a worsening regulatory environment.

Apple has more than 1 billion paid subscribers across its Services portfolio, offering Apple TV+, Apple Arcade, Apple News+, Apple Card, Apple Fitness+ and Apple One bundle.

For the Services segment, Apple expects a double-digit growth rate, similar to the first three quarters of fiscal 2024. The consensus mark for Services is currently pegged at $25.759 billion, suggesting 15.4% growth on a year-over-year basis.

Apple’s Mac Sales to Fall Y/Y

Apple’s Mac shipment is expected to have plunged 24.2% year over year in the third quarter of calendar 2024, per IDC data. The iPhone maker is estimated to have shipped 5.3 million Macs, grabbing a market share of 7.8% compared with 10% in the year-ago quarter.

Apple’s estimated shipment decline rate is the largest in IDC’s vendor list, followed by Dell Technologies DELL, whose shipment declined 4%. While shipments of Acer Group, Lenovo and HP HPQ increased 4.4%, 3% and 0.4%, respectively, ASUS gained 10%.

IDC estimates 68.8 million sold units in the third quarter of 2024, down 2.4% year over year. In contrast, Gartner estimates shipment of 62.9 million units, down 1.3% year over year. In Gartner’s list, Acer Group gains the most in terms of shipments (up 4.4%), as well as market share (7.3% versus 6.9% in the year-ago quarter), followed by Apple (shipments up 3.5%).

AAPL Shares Underperform Sector, Beat Industry

Apple shares have returned 21.2%, underperforming the Zacks Computer & Technology sector’s return of 26.3% but beating the Zacks Computer – Micro Computers industry’s 20.9%.

Year-to-Date Performance Chart

Image Source: Zacks Investment Research

Apple stock is not so cheap, as the Value Score of D suggests a stretched valuation at this moment.

In terms of the forward 12-month Price/Earnings ratio, AAPL is trading at 30.06X, higher than the Zacks Computer & Technology sector’s 26.44X.

Price/Earnings Ratio (P/E F12M)

Image Source: Zacks Investment Research

AI Focus Aids AAPL’s Prospects

AAPL has been on the investors’ radar thanks to its AI push with the introduction of Apple Intelligence, an advanced personal intelligence system seamlessly integrated into iOS 18, iPadOS 18 and macOS Sequoia.

Apple’s AI push is expected to bring consumer-focused AI-enabled PCs into the market, thereby aiding PC shipments in the long haul.

AAPL has been playing catch-up in the AI space compared with Alphabet, Microsoft MSFT and Amazon, its peers in the “magnificent seven” group. Following the launch of Apple Intelligence, its competitive position is expected to improve.

Leveraging the power of GenAI models, Apple Intelligence aims to enhance user experience across iPhone, iPad and Mac by combining robust language and image understanding with personal context. This technology, powered by Apple silicon, promises to simplify and accelerate everyday tasks while maintaining Apple’s stringent privacy standards.

Apple Intelligence will be first available in U.S. English and will be expanded quickly to include localized English in Australia, Canada, New Zealand, South Africa and the U.K. in December. Additional language support — Chinese, French, Japanese and Spanish — will be available next year.

Apple has integrated ChatGPT into its platforms, allowing users to access its expertise directly within iOS 18, iPadOS 18 and macOS Sequoia.

Apple Shares – Buy, Sell or Hold?

Apple’s near-term results are expected to bear the brunt of the weakness in China and weakness in PC shipments. However, it is benefiting from increasing customer engagement in the services segment.

Apple’s top line is likely to have benefited from strong growth in emerging markets and growing adoption of its devices among enterprises.

Currently, Apple carries a Zacks Rank #3 (Hold), which implies that investors should wait for a better entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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