After the U.S. stock market closed on Thursday, February 1, consumer electronics and technology giant Apple, whose market value has missed the US$3 trillion mark for many days in a row, released its first quarter report for fiscal year 2024 (i.e., its fourth quarter results for the natural year 2023). Together with Meta and Google, it ended the financial reporting season for large technology stocks. Some analysts pointed out that its huge market value makes it account for about 7% of the weight of the S&P 500 Index, and changes in its stock price are enough to affect the performance of the market. As a 3C consumer goods giant, this financial report that coincides with the year-end shopping season can also reflect clues about the overall economic health and consumer spending willingness.
The financial report showed that Apple’s quarterly revenue was US$119.58 billion, higher than analysts’ expectations of US$117.97 billion. Revenue returned to year-on-year growth, with iPhone revenue of US$69.7 billion, higher than the US$68.55 billion expected. However, revenue in Greater China was US$20.82 billion, a year-on-year decrease exceeding the expected US$23.5 billion. Apple rose 1% after the bell, then fell 1.5%.
Apple closed up 1.3% on Thursday, ending its six-day losing streak and breaking away from a two-week low. However, it fell 3% at the beginning of 2024, lagging behind the cumulative gains of the S&P 500 Index and the Nasdaq Index over the same period. It was the worst performer among large technology stocks except Tesla, which had risen 49% in 2023.
Most analysts on Wall Street are optimistic about Apple. In one statistics, 26 people gave it a "buy" rating, 12 people rated it "hold", and 2 people rated it "underperform the market." The average target price is about US$200, which means there is still room for a 7% increase.
Market expects quarterly revenue to return to growth, iPhoneand service are great, but the iPadand wearable devices declined by double digits
Apple's first fiscal quarter, which accommodates the year-end holiday shopping season, usually has its strongest performance of the year. After overall sluggish iPhone sales in 2023, Wall Street generally expects Apple to return to year-on-year revenue growth this year.
The market expects its revenue for the current quarter to be US$118 billion. Although it will only increase less than 1% from US$117.2 billion in the same period last year, it will be the first increase since the fourth quarter of fiscal year 2022.Total revenue ended at2023Four consecutive quarters of year-on-year decline in fiscal year.
The calendar year 2023 was the first time since 2001 that Apple has experienced negative revenue growth for four consecutive quarters. Quarterly data collected by the agency FactSet can be traced back to 1998. During this period, Apple has never experienced a year-on-year decline in revenue for five consecutive quarters.
The company's profits are expected to increase significantly,After adjustmentEPSEarnings per share may increase by 11.2% year-on-yearto 2.09The U.S. dollar is at its best level in two years.Net profit is expected to be US$32.56 billion, which will be the highest in two years since the first quarter of fiscal 2022. The gross profit margin is expected to be 45.46%, up from 45.2% in the previous quarter.
Some analysts say this is due to the rebound in sales of the iPhone 15 series launched last year, as well as the high-margin service revenue maintaining a double-digit percentage growth. The improvement in demand for personal computers also drove Mac revenue to significantly increase compared with the previous quarter.
From a business perspective,“Female product”, the iPhone, which accounts for half of Apple’s total revenueSales in the fiscal first quarter are expected to be $68.64 billion, which would be the second-highest quarterly level in the company's history and increase 4.3% year-over-year from $65.78 billion in the same period last year.
Canalys' global smartphone shipment report said Apple's market share in the fourth quarter of last year was 24%, surpassing Samsung's 17%. IDC data shows that Apple’s market share in 2023 will be 20.1%, higher than Samsung’s 19.4%, making it the world’s largest mobile phone manufacturer. But some analysts warn that iPhone sales may not be able to maintain this momentum in 2024 as consumers' replacement cycles extend.
Among other hardware,Mac computer revenue, which accounts for 10% of total revenue, is expected to be US$7.77 billion, an increase of 0.9% from US$7.7 billion in the same period last year. Last quarter, it plummeted 34% year-on-year. iPad tablet computer revenue is expected to be US$7.06 billion, which will fall by more than US$2 billion or 25% from US$9.4 billion in the same period last year. Revenue from wearable devices, home furnishings and accessories, including wireless headphones, smart watches and smart speakers, is expected to be $11.27 billion, down 16.5% from $13.5 billion in the same period last year.
However, some analysts say that Apple may release new versions of iPad and Mac in March this year, which will help increase future sales of these two product lines. Mac revenue's return to growth also reflects the recovery in global PC demand. Gartner statistics show that Apple's global market share increased from 9.4% to 10% at the end of last year. Apple said last year that iPad and wearable device growth would slow down significantly from the previous quarter due to different product release times.
Service revenue, which has the highest profit margin and accounts for a quarter of total revenueIt is expected to be US$23.4 billion, a year-on-year increase of 12.5% from US$20.8 billion in the same period last year. It will hit a new high for four consecutive quarters and continue the double-digit percentage growth trend of the previous quarter. Before the third quarter of 2023, it had recorded single-digit percentage growth for four consecutive quarters.
Services include the App Store app store, audio and video streaming Apple Music and Apple TV+, iCloud storage, AppleCare warranty, advertising revenue from the Google search engine license agreement, payment fees for Apple Pay and other products, etc. After the iPhone has become a more mature product, services are an important area for Apple's business diversification, reflecting consumer demand trends even earlier.
Some analysts said that service revenue benefited from the increasing number of users of the Apple AppStore application store, the significant increase in AppleTV+ ratings, and the continued expansion of the device installation base. As of the end of fiscal year 2023, Apple's service portfolio has more than 1 billion paying users, and media industry reports show that AppleTV+ consumption has doubled in 2023, with total viewing ratings soaring 42% year-on-year.
Three major focuses of attention: iPhoneSales volume, mixed reality headsets on sale, AI"Arms Race"
Investors will focus on the future quarterly performance development direction provided on the earnings call, iPhone sales and the performance of Greater China, which contributes 20% of annual revenue, the VisionPro mixed reality head-mounted display device officially launched in the United States on Friday, and Apple's AI efforts.
The market consensus is that the starting price is 3,500USD VisionProWon’t bring in a lot of initial revenue,UBS expects Apple to ship about 400,000 headsets this year, with revenue of only a "relatively inconsequential" $1.4 billion, and not have a significant impact on earnings.
But as Apple's first new product category in nearly a decade since the launch of smartwatches in 2015, Vision Pro may improve market confidence in Apple and confirm the company's status as a leading technology innovator in AR/VR, which will help drive stock prices.
Reports emerged on Tuesday that the headset sold out almost immediately after opening for pre-order on January 19, with a total of about 200,000 units sold. However, "Apple's most accurate analyst" Ming-Chi Kuo of Tianfeng International said that the delivery time remained stable after 48 hours, indicating that VisionPro is still "a very niche product" and the seemingly explosive demand may "quickly decrease" after die-hard fans place orders.
As a core business with sales far exceeding that of other hardware products, the health of the iPhone, especially the sales trend in Greater China, will be of particular concern. The market is expected toAs Apple's third largest sales market after North America and Europe, the overall quarterly revenue in Greater China will increase from239US$23.5 billion fell tobillion US dollars.
Ming-Chi Kuo's latest research report is more pessimistic, saying that iPhone shipments this year may drop by up to 15% year-on-year due to structural challenges, and will lose to foldable phones incorporating AI technology. In the past few weeks, weekly shipments in China have dropped sharply by 30% to 40% year-on-year:
"Apple's supply chain currently shows that the company expects to ship approximately 200 million iPhones in the calendar year 2024, which is a decrease of approximately 15% from 2023. In 2024, Apple may have the most significant decline among the world's major mobile phone brands."
And in AIIn terms of technology, Apple has not yet specifically announced the launch of generative artificial intelligence products.Instead, it focuses on machine learning to improve the accuracy of its autocomplete feature. There have been previous reports that Apple is working hard to integrate AI technology into future products. In its last financial report, Cook admitted that it was "investing a lot of money" in generative AI, but refused to disclose details, saying only that "it will be researched and developed responsibly."
Ming-Chi Kuo has predicted that the iPhone 16 launched this fall is unlikely to include major design changes, and Apple will not launch a more artificial intelligence-centric design until 2025 or later, which may harm iPhone shipment momentum and ecosystem growth.
Thirteen strategists and portfolio managers asked by mainstream media last week all said that Microsoft's early leadership in the field of artificial intelligence will put the software giant's market value "decisively ahead" of Apple in the next five years. King Lip, chief strategist of Baker Avenue Wealth Management, bluntly stated that the iPhone, which Apple relies on most, is already in a fairly mature market, and the company has not yet detailed how it will participate in the artificial intelligence arms race.
Wall Street continues to worry about iPhoneMarket share challenges in Greater China and greater regulatory resistance
Due to concerns about poor iPhone sales in Greater China, mainstream investment banks such as Barclays, Piper Sandler and Redburn Atlantic rarely downgraded Apple's stock rating at the beginning of the new year. Baird and UBS are also cautious about Apple's March quarter prospects.
Among the investment banks that downgraded their ratings, Barclays is worried about weak Apple hardware sales, and Piper Sandler is worried about regulatory headwinds such as patent disputes surrounding Apple smartwatches and antitrust lawsuits. They both pointed out Apple's potential weaknesses in the iPhone and services areas.
UBS said that China's iPhone inventory increased by 2 million to 3 million units, which helped Apple's December quarter revenue exceed expectations, but this shifted the sales risk to the March quarter, and inventory may be 15% to 20% higher than demand.
In the bullish camp, Bank of America raised Apple's rating and target price two weeks ago, saying that the VisionPro head-mounted device gives the company a promising artificial intelligence product roadmap and will be a catalyst for future growth, and the outlook for the service sector has also improved.
Morgan Stanley also believes that its fundamentals are recovering and may bring huge improvements in 2024, because this will be "the year when Apple's edge artificial intelligence (EdgeAI) opportunities may be realized." "Siri2.0 supported by the LLM large language model and an operating system supported by broader generative AI may promote the iPhone replacement upgrade cycle."
Goldman Sachs rated Apple a "buy" and said it should be "prepared for accelerated growth in the second half of the year." Service revenue is expected to benefit from the increasing penetration of all service categories, especially iCloud+, as data consumption growth exceeds device storage, and higher device average selling prices also make AppleCare+ product insurance services more popular.
JPMorgan Chase, which also holds an "overweight" rating, said profits will have a greater impact on Apple's stock price than revenue. "The premiumization of the iPhone, the driving force of a higher product price mix, and strict cost management are helping to improve hardware profit margins, and changes in the service mix will also further promote profit margin improvements."
Wedbush star technology analyst Dan Ives said that investors' concerns about iPhone sales are overdone. "So far, iPhone demand in China has been stable and will benefit from strong upgrade demand for high-end mobile phones. It is estimated that about 100 million iPhones in China are in the window period of upgrade opportunities, which will help partially offset the competitive pressure of local brand manufacturing in the Chinese market."
In terms of regulatory pressure and legal challenges, Apple willThe beginning of the year is indeed “big”.
The patent dispute with medical device manufacturer Masimo has caused Apple to stop selling smartwatches Apple Watch Series 9 and Apple Watch Ultra 2 that use blood oxygen sensors many times, which may affect Apple's profits and wearable device revenue, which accounts for more than 10% of total revenue.
And just as Apple's agreement to charge tens of billions of dollars a year to make Google the default search engine in Safari may be in jeopardy, there are reports that the U.S. Department of Justice is considering whether to launch a major antitrust lawsuit against Apple over the iPhone's alleged anti-competitive behavior.
Apple is currently undergoing some of its biggest changes yet, preparing to make major changes to its app store policies in Europe to comply with the EU Digital Markets Act. For example, it will begin to open European consumer iPhone devices to third-party app stores and allow game streaming services such as Microsoft's Xbox Cloud Gaming to be used on the devices.