Apple (NASDAQ:AAPL) will announce its second-quarter financials on Thursday, May 4, 2023. Wall Street expects Apple’s top line to drop, reflecting the ongoing weakness in product sales. However, the momentum in Services revenue could continue to support overall sales.
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Analysts Weigh In
Analysts expect Apple to report revenue of $92.91 billion in the second quarter, reflecting a year-over-year decline of about 4.5%. Momentum in Services sales and the easing of supply-chain headwinds and improvement in China could support overall revenue, but tough year-over-year comparisons and pressure on consumer spending due to high inflation and interest rates will likely hurt Mac sales.
Monness analyst Brian White expects AAPL’s Q2 revenue to decrease by 6%. In a note to investors dated May 1, White expects iPhone sales to improve compared to Q1. However, he sees iPhone revenue declining by 4% year-over-year. The analyst projects a 43% drop in Mac revenue, reflecting weak consumer spending trends and normalization in demand post the easing of COVID-led lockdowns.
Nonetheless, White forecasts a 7% growth in Apple’s Services sales, reflecting a growing installed base of active devices and an increase in paid subscriptions.
Along with White, Goldman Sachs analyst Mike Ng sees a 3% drop in Apple’s Q2 revenues. On April 24, the analyst said he expects a 5% fall in AAPL’s product revenues. However, he expects iPhone sales to offset the weakness in Mac revenue.
Given the ongoing pressure on its top line, analysts project AAPL’s earnings to decline in Q2. Wall Street expects AAPL to post earnings of $1.43 a share in Q2, compared with an EPS of $1.52 in the prior year’s quarter.
Is Apple a Buy, Sell, or Hold?
Apple stock has gained about 30% year-to-date. Further, analysts maintain their bullish outlook on AAPL stock. It has received 21 Buy, four Hold, and one Sell recommendations ahead of Q2, reflecting a Strong Buy consensus rating.
The analysts’ average price target of $175.05 implies 3.86% upside potential.
Bottom Line
While Apple’s top line is projected to decline in Q2, iPhone sales could show improvement. Further, the easing of supply-chain headwinds and ongoing strength in the Services segment bodes well for growth. Apple could also provide a favorable update on share buybacks or dividends, which could act as a catalyst.
