Live Updates Updated 2024-08-01T17:03:31Z

Tim Cook

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  • Amazon reports third-quarter earnings on Thursday.
  • The tech giant suffered from weak demand and rising competition in China earlier this year.
  • Investors are looking for updates on its performance in China and coming products, like the iPhone 16.

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Apple is on deck to report fiscal third-quarter earnings after the closing bell on Thursday.

Analysts are feeling more positive about the iPhone-maker’s results over the past quarter, despite headwinds earlier this year stemming from weak demand and rising competition in China.

Investors will be on high-alert for updates on the firm’s success in China, the services side of its business, and Apple’s key projects. That includes Apple Intelligence, its coming AI software, and the iPhone 16, which is set to be released this fall.

Apple’s stock was up 15% year-to-date through Wednesday’s close, slightly lagging the the S&P 500‘s 16% gain.

Morgan Stanley says a big iPhone upgrade cycle is coming

Apple’s AI software could be a “clear catalyst” for iPhone users to upgrade their devices, Morgan Stanley said. SOPA Images/Getty Images

Morgan Stanley’s research team reiterated Apple as its “top pick”, thanks to a large number of Apple users set to upgrade their devices. By the end of this fiscal year, there could be a record 700 million iPhones that are at least three years old, the bank estimated.

“Apple Intelligence is a clear catalyst for a multi-year product upgrade cycle,” analysts added in a note. “Never in Apple’s 40 year history has the iPhone installed base been so large (1.3b+ devices), replacement cycles been so extended (at 4.8 years), and a new technology been limited to such a small cohort of users (8% of the iPhone/iPad installed base) all at the same time.”

The bank’s research arm reiterated its “overweight” rating on the stock and raised its price target to $273 a share, implying 23% upside.

Bank of America says AI features will fuel iPhone demand

Apple looks on track to pull slightly more revenue than initially expected — but investors will “mostly ignore” the earnings results and focus on guidance related to AI-enabled iPhones, revenue growth in China, and revenue growth on the services side of the business, BofA strategists predicted.

“We see pent up demand and a meaningful number of older iPhones in the installed base, and the new AI features should help drive an upgrade cycle,” analysts added in a note.

The bank reiterated its “buy” rating on the stock and raised its price target to $256 a share, implying 15% upside.

Wedbush says Apple’s ‘turnaround’ is beginning in China

Apple may have seen its last negative growth period in China, Wedbush predicted. Andrew Burton/For The Washington Post via Getty Images; Justin Sullivan/Getty Images; Rebecca Zisser/BI

Apple’s business could be making a comeback as iPhone demand looks like it’s stabilizing in China, according to supply-chain checks Wedbush conducted in Asia. That could set up the company to initially ship around 90 million iPhone 16s, higher than the consensus of 80 to 84 million, analysts said.

“We strongly believe June will be the last negative growth quarter for China with a growth turnaround beginning in the September quarter. China remains the linchpin of growth for Apple and now this key region is set to see growth once against starting with iPhone 16 in our view,” the firm in a note in July.

Wedbush reiterated its “outperform” rating on the stock and issued a price target of $275 a share, implying 24% upside.

Apple’s consensus third-quarter revenue estimate is $84.46 billion.

Third Quarter

  • Revenue estimate: $84.46 billion

  • Products revenue estimate: $60.63 billion

    • iPhone revenue estimate: $38.95 billion
    • Mac revenue estimate: $6.98 billion
    • iPad revenue estimate: $6.63 billion
    • Wearables, home, and accessories estimate: $7.79 billion
  • Service revenue estimate: $23.96 billion
  • Greater China rev. estimate: $15.26 billion
  • EPS estimate: $1.35
  • Operating cash flow estimate: $29.48 billion
  • Total operating expenses estimate: $14.39 billion
  • Gross margin estimate: $39.06 billion
  • Cash and cash equivalents estimate: $28.98 billion
  • Cost of sales estimate: $45.43 billion
  • Total current assets estimate: $124.01 billion
  • Total current liabilities estimate: $121.5 billion

Source: Bloomberg

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