Apple’s Q4 earnings surpass estimates, shares slide on lukewarm Q1 forecast

Apple Inc. (NASDAQ:AAPL) surpassed Wall Street’s fourth-quarter fiscal year 2023 earnings per share (EPS) predictions, posting $1.46 versus the consensus estimate of $1.39. The tech giant also reported a slightly higher revenue of $89.5 billion, a 0.7% year-on-year decrease, beating the projected figure of $89.34 billion. This marked the fourth consecutive quarter of slowing top-line growth.

Despite the better-than-expected results, Apple shares (NASDAQ:) declined in premarket trading following the company’s tepid current quarter guidance issued post-September results. This prompted Wall Street to revise its price target for Apple to $185 from a previous higher value, reflecting softer product demand but interest near $165 due to slower December quarter growth.

The company’s forecast for stagnant holiday quarter revenue is attributed to a downturn in the Chinese market, triggered by government actions and increasing competition from Huawei’s new phone offering. Consequently, Apple’s revenue from China decreased to $15.1 billion, falling short of the predicted $17 billion.

In terms of product sales, Apple anticipates an increase in iPhone revenue for the current quarter, backed by comments from Qualcomm (NASDAQ:) and recent monthly revenue data from Taiwan Semiconductor. The expected growth in iPhone sales and the Mac refresh are likely to offset a sharp drop in iPad and wearables sales, notably in the smartwatch line.

Apple’s Services sector, which is its second-largest business, is projected to grow “strong double digits,” following a 16% YoY rise in the September quarter. With over 1 billion paid subscribers, price hikes across Apple’s Services business are expected to ensure steady revenue and EPS generation.

Despite CEO Tim Cook pointing out record revenues in India, China’s slowdown poses a significant headwind for Apple’s performance. However, any normalization of US-China relations could potentially enhance global economic sentiment and the shares of Apple and other tech companies like Micron (NASDAQ:).

InvestingPro Insights

In addition to the article’s analysis, there are valuable insights to be gleaned from InvestingPro’s data and tips. For instance, InvestingPro’s data shows that Apple has a market cap of $2750.0B and a P/E ratio of 28.61 as of Q4 2023. The company’s revenue for the last twelve months as of Q4 2023 was $383.29B, with a slight decline of 2.8% in revenue growth.

Moreover, two InvestingPro Tips stand out. Firstly, Apple has a high earnings quality, with free cash flow exceeding net income. This suggests the company is in a strong financial position, despite the challenges discussed in the article. Secondly, Apple has been aggressively buying back shares, which can often be an indication of a company’s confidence in its future prospects.

These insights and many more can be found on InvestingPro, which currently offers a total of 20 tips for Apple. The platform provides a comprehensive view of the company’s performance, helping investors make informed decisions.

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