What Wall Street experts are saying about Apple ahead of earnings

Apple (AAPL) is scheduled to report results of the second fiscal quarter of FY24 after the market close on Thursday, May 2, with a conference call scheduled for 5:00 pm ET. What to watch for:

LAST QUARTER: Last quarter, Apple beat consensus sales and earnings expectations, reporting EPS of $2.18 on Q1 revenue of $119.6B, which compared to consensus forecasts of $2.10 and $117.91B, respectively.

At that time, Apple CEO Tim Cook said: “Today Apple is reporting revenue growth for the December quarter fueled by iPhone sales, and an all-time revenue record in Services. We are pleased to announce that our installed base of active devices has now surpassed 2.2 billion, reaching an all-time high across all products and geographic segments. And as customers begin to experience the incredible Apple Vision Pro tomorrow, we are committed as ever to the pursuit of groundbreaking innovation – in line with our values and on behalf of our customers.”

Cook added: “As we look ahead, we will continue to invest in technologies that will shape the future. That includes artificial intelligence where we continue to spend a tremendous amount of time and effort, and we’re excited to share the details of our ongoing work in that space later this year.”

Current consensus EPS and revenue forecasts for Apple’s March-end quarter stand at $1.50 and $90.01B, respectively, according to data from Refinitiv.

Consensus EPS and revenue forecasts for Apple’s June-end quarter stand at $1.30 and $82.89B, respectively, according to Refinitiv.

BUY THE FEAR: In a preview published on April 29, Bernstein upgraded Apple to Outperform from Market Perform with an unchanged price target of $195. The shares have de-rated significantly amid a weak iPhone 15 cycle and fears that Apple’s China business is structurally impaired, the analyst told investors. However, the firm believes prevailing weakness in China is more cyclical than structural, and notes that historically Apple’s China business has exhibited much higher volatility than Apple overall, given its “very feature-sensitive installed base.” Bernstein believes replacement cycle tailwinds and incremental generative artificial intelligence features set up Apple well for a strong iPhone 16 cycle. Tactically, expectations are low entering the company’s fiscal Q2 results, it added, telling investors to “buy the fear.”

Meanwhile, on April 26, Erste Group downgraded Apple to Hold from Buy. Apple’s growth momentum continues to slow and the company’s new products do not currently have the potential to significantly improve sales momentum, the analyst told investors. The firm says Apple’s continuing declining sales in China “is also having a particularly negative impact on sales development.” Erste believes no change in this respect is currently foreseeable.

In its own recent preview, Citi lowered the firm’s price target on Apple to $210 from $220 and kept a Buy rating on the shares. Analyst Atif Malik expects Apple’s March quarter sales and earnings to come in below Street estimates and remains conservative on iPhone demand in 2024, especially in China, before the company could demonstrate generative artificial intelligence features to boost unit demand in 2025. However, Citi believes first half of 2024 “bad news” is largely priced into the shares. Investors are looking through the upcoming earnings to the WWDC24 event in June for AI updates, the firm added.

NEXT BIG THING MAY BE AI OR ROBOTS, BUT WON’T BE CAR: On February 27, Bloomberg’s Mark Gurman reported, citing people with knowledge of the matter, that Apple is ending a decade-long effort to build an electric car, abandoning one of the most ambitious projects in the company’s history. Apple shared the disclosure internally in a communication from Chief Operating Officer Jeff Williams and Kevin Lynch, a vice president in charge of the effort, surprising the nearly 2,000 employees working on the project, said the sources. The two executives told staffers that “Project Titan” will begin winding down and that many employees on the team working on the car – known as the Special Projects Group, or SPG – will be shifted to the artificial intelligence division under executive John Giannandrea, Gurman added.

In a follow-up report, Gurman said Apple’s belief it could make a better car than Tesla (TSLA) and the rest of the automotive industry led to the project’s downfall. Apple began working on the vehicle a decade ago and set out to create a full-blown self-driving car that would upend the industry and look nothing like anyone has seen before. The challenge of creating a full self-driving car and a groundbreaking design became a challenge that was too difficult for Apple to overcome, Gurman stated.

In early April, Gurman reported, citing people familiar with the situation, that Apple has teams investigating personal robotics with an eye on its “next big thing” following the failure in electric cars. Apple engineers have been exploring a mobile robot that can follow users around their homes and have also developed an advanced table-top home device that uses robotics to move a display around, sources told Bloomberg. The effort is still in the beginning stages and it’s unclear if the products will ultimately be released, Gurman said, while adding that Apple is under growing pressure to find new sources of revenue.

On April 26, Bloomberg’s Gurman reported, citing sources, that Apple has renewed talks with OpenAI about using the company’s technology to power some new features coming to the iPhone later this year. The two companies have begun discussing terms of a possible agreement and how the OpenAI features would be integrated into Apple’s iOS 18, the next iPhone operating system, said the people, who asked not to be identified because the deliberations are private.

GEMINIPHONE: On March 18, Gurman reported, citing people familiar with the matter, that Apple and Google (GOOGL) were in active negotiations to let Apple license Google’s artificial intelligence engine Gemini into its iPhone. Apple has also recently held discussions with OpenAI and has considering using its model, sources told Bloomberg.

After Bloomberg reported that Apple and Google were in deep discussions for the latter’s Gemini to power Generative AI features coming to the iPhone with iOS 18, a Medium post that Apple is reviewing and adjusting its head-mounted display product roadmap, so there may be no new Vision Pro model in 2025, and that Apple now expects Vision Pro shipments to decline year-over-year in 2025.

PRODUCT HEADLINES: During the quarter, other reporting on Apple’s products and plans have included:

• Apple considers development of fitness ring, smart glasses, Bloomberg reports
• Apple buys Canada’s DarwinAI as part of race to add features, Bloomberg says
• Apple has held talks with China’s Baidu about AI, WSJ reports
• Apple acquired French AI startup Datakalab in December, Challenges says
• Apple said to be close to TV deal with FIFA for new soccer tournament, NY Times reports
• Apple’s new iPad Pro could launch with M4 chip, Bloomberg reports

SENTIMENT: Check out recent Media Buzz Sentiment on Apple as measured by TipRanks.