Apple Earnings Preview: Can It Beat Higher Expectations?
Oct 23, 2023
Apple (AAPL) stock opened 2023 at $130.28, and it's been smooth sailing to the upside for most of the year, reaching a peak price of $198.23 on July 19. But it's currently sitting in the middle of the price range at $173.69. The stock is still up over 30% on the year even though it's trading well below the high of the year.
Apple is expected to report earnings per share (EPS) of $1.39. That’s $0.20 higher than last quarter's estimate, which Apple beat by 5.49% after reporting EPS of $1.26.
Revenue estimates are also much higher at $89.31 billion, compared to the previous quarter's estimate of $81.80, which Apple met.
The stock price's expected move through the earnings announcement based on current implied volatility is +-$7.38, which is less than 5% of the current stock price. That’s low compared to other big-name tech stocks and their expected moves for upcoming earnings.
Many analysts are concerned about international sales of new and existing iPhones, specifically in China. But I'm not certain the market is worried, given that EPS and revenue numbers are expected to be so much higher than last quarter.
As with any other tech stock, all eyes will be on Apple stock after the market closes Nov. 2. The fact Apple has met or beaten revenue and EPS estimates three of the past four quarters tells us it has consistently outperformed expectations, but expectations are higher this time around.
Higher estimates mean a greater outperformance is necessary for the stock to really take off to the upside. That concerns some analysts. If you think it can beat an already high earnings estimate, it could mean good things for bulls on Apple stock, especially if guidance for the rest of the year is positive.
Apple stock is such a darling in the eyes of everyday investors that the public looks for any reason to buy it. But with such a low expected move for the stock price this quarter, and a sizable increase in EPS and revenue estimates, the tech giant really must blow earnings out of the water to beat expectations this time around.
Apple also struggled to keep revenue elevated on its income statement the past few quarters, which is concerning for such a household-name tech stock. If you're bearish on Apple earnings and think that a miss in either EPS or revenue could send the stock tumbling, an increased expectation for both figures isn't the worst setup for an earnings selloff!
Tune in to Options Trading Concepts Live on Thursday Nov. 2 at 11 a.m. CDT for a full earnings strategy breakdown ahead of the announcement.
Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb
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