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Macro Valuation® | Report 3 – Apple

Highlights of Apple Stock Earnings Slip

The key takeaways of the earnings report slip revolved around a significal decline versus sales expectations in China and a decline in MacBook sales.

China’s shrinking iPhone revenues, in combination with other regional challenges, led to a substantial effect on Apple’s earnings estimates, resulting in a plunge in year-over-year comparisons from the period last year.  This plunge was 2 Billion USD.

It is important to note that China represents 20% of Apple sales.  Thus, what the key question here is how much did the introduction of the new Huawei Mate 60 Pro phone along with Chinese restrictions on the Apple iphone impact revenues?

In our last Apple post we asked the question: Is the Valuation of Apple Pricing in Geopolitical Risk? Apparently, the market did not price this in and may even ignore it in future valuation.  It should be emphasized that iphones are the most most important part of the Apple ecosystem and if you have lower iphone sales this will lead to lower sales long-term of services, etc.  Loses in China can be perhaps offset in the future with increased sales in India.  At least that is the hope.

On the positive side profit per share was $1.46 which was above the market consensus of $1.39.  Total iphone revenue increased by 3% with the service side of the business going up by 16%.  This is all good news to offset the decrease in China. Besides China, revenue was down in Europe and Japan.  This can be expected since growth in Europe is contracting for example.

However, the earnins slip, demonstrates an unfavorable trend for Apple Stock. The quarter earnings report shows revenue declines in several areas, including lower than expected iPhone revenue, and declines in the Mac division.

Despite the decline, AAPL remains a valuable stock. Investors believe in the company’s longevity, counting on projected earnings growth and potential future product lines.  Can this be offset with enough of a bounce back from the new MacBook Pro and products using the new M3 processors?  The release of the new iPhone 15. wearables and service offerings  are expected to bolster its stock performance in the future.

Apple Chart on November 2nd 2023

Understanding the Impact of Apple’s Earnings on Stock Market News

The earnings of Apple – one of Dow Jones’s biggest components – has a substantial influence on stock market news. With the reported earnings after the bell demonstrating a slip in fiscal 2023, it signals caution to the wider Wall Street investors community, increasing market volatility.

Apple represents 7% of the Nasdaq index by index weight and any futher drop in prices hurts overall market sentiment.  It is also one of the 30 stocks in the Dow.

The market had a relief rally after the FED held interest rates constant and noted slowing wage gains.  Let’s see if these trends hold.   Since any data that shows inflation not slowing down will mean that monetary policy will become more restrictive.  This will impact market sentiment and also the sentiment on Apple.