Apple Inc. (NASDAQ:AAPL) Fiscal Q3 2024 Earnings Preview

• Apple is expected to report a modest revenue growth of 2.71% year-over-year to $84.02 billion, with earnings per share rising 6.35% to $1.34.
• The iPhone sales are anticipated to decline by 2.3% to $38.74 billion, amidst fierce competition in China.
• Services segment and Mac sales are showing strong growth, with Mac sales expected to increase by 20.8% year-over-year.

Apple Inc. (NASDAQ:AAPL) is on the brink of revealing its fiscal third-quarter 2024 results, setting the stage for what investors and analysts alike anticipate to be a period of modest revenue growth amidst a backdrop of challenges. The tech giant, known for its innovative products like the iPhone, iPad, and Mac computers, is navigating through a complex market environment. It faces stiff competition, especially in the smartphone segment, from rivals in China, yet it continues to push forward with growth in its services and Mac sales segments. This mixed scenario presents a nuanced picture of Apple's current financial health and future prospects.

The company's revenue is expected to see a slight uptick, with analysts forecasting a 2.71% year-over-year increase to $84.02 billion, alongside a 6.35% rise in earnings per share to $1.34. This growth comes despite the potential 2.5% impact from unfavorable foreign exchange rates, showcasing Apple's resilience in a fluctuating economic landscape. The anticipation of these results has kept investors keenly interested in how the company will perform, especially given its history of consistently surpassing earnings expectations in the past four quarters.

However, Apple's journey is not without its hurdles. The iPhone, a critical revenue generator for the company, is expected to see a 2.3% decline in sales to $38.74 billion in the fiscal third quarter. This downturn is attributed to the fierce competition Apple faces in China from local brands such as Vivo, Huawei, and Xiaomi. These competitors are making significant inroads in a market where smartphone shipments have surged by 8.9% year-over-year, posing a challenge to Apple's dominance.

On a brighter note, Apple's Services segment, which includes offerings like Apple TV+, Apple Arcade, and Apple Fitness+, continues to exhibit robust growth. With an expanding paid subscriber base now exceeding 1 billion, this segment is a key driver in offsetting the declining iPhone sales. Furthermore, Mac sales have shown remarkable strength, with a projected 20.8% year-over-year increase in the second quarter of calendar 2024, indicating a significant gain in market share and outpacing competitors.

The stock's valuation, with a forward 12-month Price/Earnings ratio of 30.06X, appears stretched compared to the sector average. However, the recent price target adjustment by Srini Pajjuri from Raymond James to $250, as reported by TheFly, suggests a potential upside of approximately 14% from its current trading price of $218.84. This adjustment reflects a growing optimism about Apple's market performance, underpinned by its financial metrics, including a trailing twelve-month P/E ratio of approximately 33.56 and an enterprise value to sales ratio (EV/Sales) of about 8.97. These figures highlight the premium investors are willing to pay for Apple's earnings and the company's valuation in relation to its sales, respectively, underscoring the confidence in Apple's long-term growth trajectory.