Shares in Apple trade at 12-month low ahead of company’s earnings
Apple is gearing up to report its second-quarter results on Thursday amid concerns about falling demand for iPhones.
With shares down nearly nine per cent year-to-date and trading at a twelve-month low, Apple’s stock closed at $169.30 on Friday and slipped further into the red in after-hours trading.
The company’s market valuation of $2.5 trillion (£2 trillion) has raised eyebrows among analysts as it represents 25 times this year’s forecasted profits.
For the second quarter, analysts have given a consensus estimate of sales of $89.8bn (£71bn), a year-on-year drop of 5.3 per cent. Earnings per share are projected to be $1.50, slightly lower than the previous year’s $1.52.
Apple’s woes have largely stemmed from stagnant earnings per share growth last year, a drop in iPhone sales, problems in China and ongoing regulatory pressures in Europe and the US.
While its services division, which included the App Store, grew in the first quarter, the tech giant has been battling declining sales figures for its hardware products, such as wearables, iPhones, and iPads.
Earlier this month, research firm International Data Corporation revealed that Samsung dethroned Apple’s top spot in the smartphone market after the US tech giant unseated its rival just a few months ago.
Apple’s iPhone sales sagged 10 per cent in the first three months of 2024 compared with the same period in 2023, with shipments falling to 50.1m, according to IDC’s preliminary results.
These challenges have overshadowed record-breaking service revenues and earnings per share in the previous quarter.
Analysts are also increasingly worried about Apple’s iPhone sales in China due to economic challenges and rising competition. In February, Apple reported $20.82bn in sales in China, below the expected $23.53bn (£18.6bn), according to LSEG data.
Regulators have also been coming down hard on the tech giant. The European Commission (EC) fined Apple €1.84bn (£1.57bn) in March for “abusing” its dominant position and favouring its own music streaming app over rivals.
Later that month it announced that it would look at whether Apple is also stifling competition on its app store.
Britain’s competition watchdog is also investigating suspected breaches of competition law by Apple, following complaints that its terms and conditions for app developers are unfair and anti-competitive.
AJ Bell analysts said they are also looking for Apple’s comments on generative AI. “There is a perception that the firm is lagging some other technology leaders, despite reports that the iOS 18 operating system for iPhones and iPads will be packed with AI features,” they said in an analyst note.
Apple has recently faced a shareholder revolt over its lack of transparency about its use of artificial intelligence.
One upside for investors is the company’s cash flow and healthy coffers – with nearly $67bn as of December 2023 – which has enabled significant returns to investors through dividends and stock buybacks.
Apple is expected to keep its dividend flat at 24 cents a share in this quarter.