With plenty of market anticipation, Apple Inc. (NASDAQ:AAPL) will report its FQ3 ’15 results after Tuesday's closing bell. Estimize and Wall Street are assuming lower EPS and revenue numbers for FQ2 QoQ. Apple continues to be a market darling with a year-to-date capital return of 19.28% compared to the NASDAQ index, which has managed to rise 9.99%.
Estimize currently have over 400 estimates for Apple, and are expecting EPS to be $1.86 and revenues to come in at $49.48B. Wall Street, to no surprise is predicting lower figures than Estimize and forecast EPS of $1.79 and revenues of $49.092B.
So despite the surge in Apple’s share price over the past 2 years (up over 116%), there are number of reasons which suggest you should hold this stock leading into Tuesday's FQ3 ’15 results:
1: Explosion of growth experienced from iPhone 6 and iPhone 6 Plus launch:
Apple’s flagship product continues to produce phenomenal numbers with 40% YoY growth reported in FQ2 ’15 when the tech giant sold circa 61.2M iPhones throughout the quarter. Although this is an exciting number, there could quite easily be more to come from iPhone sales in FQ3 ’15. It is estimated that only 20% of previous iPhone customers had upgraded to either the iPhone 6 or iPhone 6 plus as at the end of March 2015. Therefore, there is plenty of room for Apple to obtain further sales from already loyal Apple users. Due to Apple’s heavy reliance on iPhone sales (around 70% of total sales), further demand for this product is going to strongly influence the company’s overall performance.
2: Penetration into China likely to result in continued growth:
Apple has continued to further diversify its revenue streams by geography over the past three years and China has been a major part of this. Nearly 29% of total revenue came from the Greater China region during FQ2 ’15. Sales in the region grew 71% YoY which far outpaced the 27% increase in global revenue. China offers Apple an attractive growth strategy and expansion into this region is only going to further boost revenues for Apple.
3: Mac Sales likely to continue to outperform competitors:
Despite the weakening PC market globally, the most recent IDC report noted that Apple’s sales were likely to benefit from the company’s recent release of the 12-inch Retina MacBook. Further, Apple’s MacBook sales are expected to continue to experience solid growth rates in China. With the continued expansion into Mainland China, sales for Apple’s products are expected to continue to thrive in this geographical location as experienced in FQ2 ’15 when MacBook sales experienced a 31% rise in sales YoY.
4: Suite of new products to further diversify revenues and stimulate sales growth in the future:
Apple has a number of products that have only recently launched or are in the process of launching. These products are likely going to help Apple reduce its reliance on its iPhone segment, which currently dictate 70% of revenues. Some of these products are:
The much anticipated Apple Watch was released in April this year and is expected to bolster revenue growth in the years to come as the smart wearable device market continues to grow.
In addition to the recent launch of the Apple Watch, Apple has also continued its aggressive strategy to offer its Apple Pay product across various geographies. Apple recently launched Apple Pay in the United Kingdom offering its services through a range of banks and payment systems including American Express (NYSE:AXP) and the Royal Bank of Scotland (LONDON:RBS). Apple also plans on penetrating other markets such as Canada and China in the near term.
Finally, Apple is likely to enter the subscription TV market this year when it enters the market with its own subscription TV service. Investors will be interested to hear how this product is progressing and more details surrounding the likely launch date and competitive strategy.
Overall, Tuesday’s report will be closely viewed by the market. If Apple can produce another set of solid figures, the share price may well re rate upwards again sending it to all time highs.