Apple Q1 Earnings Preview: Can AAPL Reclaim a $3 Trillion Valuation?

Apple Stock

As the technology sector braces for a week of heavy earnings reports, industry giants such as Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOG), Meta Platforms (NASDAQ:META), and Amazon (NASDAQ:AMZN) are set to unveil their quarterly performances. With the Federal Reserve’s initial meeting of 2024 adding an extra layer of significance, nearly one-fifth of S&P 500 Index ($SPX) constituents are expected to report earnings.

Despite Apple’s impressive 49% surge in stock value in 2023, outperforming the Nasdaq Composite’s ($NASX) 44% returns, it marked the weakest performance among FAANG constituents. In 2024, Apple continues to lag behind its FAANG counterparts, slipping into negative territory while losing its coveted $3 trillion market cap, subsequently yielding the title of the world’s most valuable company to Microsoft (NASDAQ:MSFT).

Apple is slated to release its fiscal Q1 2024 earnings report after the bell on Thursday. Investors eagerly await insights into Apple’s upcoming earnings and whether AAPL stock can recapture its $3 trillion market cap post-release.

Fiscal Q1 Earnings Preview

In fiscal year 2023, Apple faced negative revenue growth throughout all four quarters, a trend not seen since 2001. The company’s commentary on the revenue outlook for the December quarter failed to inspire confidence, stating revenues would be “similar” to the corresponding period last year.

Consensus estimates predict a less than 1% rise in Apple’s revenues for fiscal Q1 and a 3.4% increase for the full year. Analysts, however, anticipate an 11.1% growth in the tech giant’s earnings per share for the fiscal first quarter. Key points investors should monitor include:

Commentary on the Chinese market: China remains Apple’s largest overseas market, but a structural economic slowdown and fierce competition from domestic players like Huawei and Xiaomi pose significant risks.

Guidance: Apple, which halted providing quantitative forward guidance amid the COVID-19 pandemic in 2020, is expected to offer directional insights for the next quarter. Market watchers seek indications of a turnaround following topline declines in the previous fiscal year.

Update on Vision Pro: Investors anticipate information on the Vision Pro augmented reality headsets, with deliveries expected to commence soon.

AAPL Stock Forecast

Despite Apple experiencing three downgrades in January, an unusual occurrence for the company, some Wall Street analysts are cautious about AAPL stock leading up to the earnings report. Barclays, among others, maintains an “underweight” rating, expressing concerns about potential soft guidance for the March quarter.

While Apple holds a “Moderate Buy” rating from analysts, the mean target price of $206.08 is only 9.1% higher than current prices. Among AAPL’s FAANG peers, analysts express the most optimism for Amazon and the least for Netflix (NFLX).

Can Apple Reclaim a $3 Trillion Market Cap?

Apple’s market cap hovers just below $3 trillion, and a positive earnings report could propel it past this milestone. However, some believe Microsoft could outpace Apple to maintain its status as the most valuable company. A Reuters survey indicates unanimous expectations among 13 investors, strategists, and portfolio managers that Microsoft will surpass Apple in value over the next five years.

Both Apple and Microsoft are viewed as credible contenders to reach $5 trillion valuations. While Apple explores growth opportunities, particularly in the Indian market, challenges persist in filling the void left by slowing sales in China. Additionally, the new Vision Pro headset may not represent the transformative “iPhone-size opportunity” Apple seeks for sustained growth.

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