* Q3 2019 results reports on Tuesday, July 30, after the close
* Turnover forecast: $ 53.35 billion
* EPS forecast: $ 2.09
When Apple Inc. (NASDAQ 🙂 reports Monday 3Q, there is a big question to which investors want an answer: how deep is the delay in iPhone sales?
iPhones, which make up more than half of Apple's revenue, are crucial to the company's future growth, at least in the short to medium term. In the past quarter, Apple reported that its revenue in the fiscal second quarter fell 5% compared to a year earlier, thanks to a 17% drop in iPhone revenue.
Despite this setback, investors still sent Apple's shares higher, mainly because the dip in sales was not as bad as the market expected. Apple's share price rose 33% this year and ended yesterday's session 0.8% at $ 207.02.
But those better-than-expected performances should not hide the fact that the problems highlighted by Tim Cook in his letter to investors in January are still there. China, at the heart of Apple & # 39; s sales weakness, is still a major threat because the economy is struggling with the effects of the ongoing trade conflict with the US
And the outcome of trade negotiations in the US and China is still a mystery. The dispute adds much more risks to the future growth of the maker of iPhones. The biggest among them is the disruption of the company's huge supply chain system in China – an extensive network of cheap suppliers – if both countries do not resolve their differences.
Another layer of uncertainty
This misery is the latest announcement from the Justice Department that it is opening a new, broad antitrust assessment of the world's largest technical giants, including Apple, Amazon.com (NASDAQ 🙂 and Facebook (NASDAQ :). Although it is extremely difficult to predict a particular result of this new probe, it is clear that it adds a new layer of uncertainty to the future prospects of these companies and may act as a brake on their stock prices.
These challenges are by no means small and can continue to produce boom-and-bust cycles for Apple shares in the short term. But we believe the company has everything to become a winner in the long run.
Apple succeeds in reinvigorating its revenue growth and diversifying its revenue from iPhones. The company's services, including Apple Music, movie rentals, and app downloads, produced a 33% growth last year with revenue of $ 40 billion – accounting for around 15% of the company's total of $ 265 , 6 billion.
That contribution will certainly accelerate as soon as the company's new service line – video streaming, Apple Pay and gaming – starts to play. According to an estimate by Morgan Stanley, the service contribution will continue to grow and around 60% of Apple's sales over the next five years.
Bottom Line
There is a good chance that the third quarter earnings report will disappoint Apple bulls because of the headwind that the company is facing in today's uncertain economic environment. But in our opinion, every dip in Apple shares should be seen as a buying opportunity, given the strong global brand, cash position and the drive to diversify revenues.
