Apple’s first earnings report of the decade is barely 24 hours away, and Wall Street is praying for another historic quarter.
After defying gravity for the last 12 months, Apple’s soaring stock price suffered its biggest single-day loss in more than six months today. Tuesday’s Q1 2020 earnings, which will cover sales from the 2019 holiday season, could provide the jolt AAPL shares need to start jumping up the charts again. However, certain hot topics — and what Apple says about them — could signal a downturn ahead.
Apple set its revenue guidance for Q1 2020 earnings between $85.5 billion and $89.5 billion. An overwhelming consensus of analysts predicts Apple will pull in about $88.5 billion in revenue. What investors are most interested in, though, is the breakdown of revenue by categories.
Apple CEO Tim Cook and CFO Luca Maestri are set to get on the phone with investors on Tuesday, January 28, at 2 p.m. Pacific. Unfortunately, Cult of Mac won’t be asking them any questions. But here are a few we hope investors and analysts will put out there:
Apple earnings: How’s iPhone 11 doing?
In recent quarters, services have been Apple’s big driver of growth while iPhone sales have slumped. But there are some strong signs that the iPhone 11 is selling better than expected. Apple’s fiscal Q1 2020 was the first full quarter of sales for the iPhone 11 lineup. Demand for the iPhone 11 was so high it was estimated to have made up 39% of Apple’s U.S. sales during the quarter.
The only downside to strong iPhone 11 sales is that would mean customers aren’t spending more money on the iPhone 11 Pro and Pro Max models. That could have a negative impact on Apple’s margins. Apple doesn’t dish out unit sales figures anymore. But if revenue comes in a little less than amazing, it will probably be the iPhone’s fault.
Will the Chinese coronavirus impact Apple’s operations?
Investors are absolutely shook about the new coronavirus outbreak in China. The Dow Jones Industrial Average tumbled nearly 400 points today due to fears that the outbreak could get worse and that the resulting quarantines will shut down crucial supply chains.
Apple has 69 supplier sites in Suzhou, China. That city isn’t on lockdown yet, but it is next to Wuhan, the hardest-hit area. Operations have been shut down at two supplier sites in Wuhan but Apple has alternatives.
If the outbreak gets worse, more of Apple’s 381 supplier facilities in China could be threatened, putting a strain on the supply of crucial components. We expect Tim Cook will get a lot of questions about how prepared Apple is to deal with the coronavirus. Apple’s guidance for Q2 2020 may reflect a cautious view of how the situation will play out.
Where are the Apple TV+ numbers?
Apple TV+ launched midway through the last quarter and we still have no idea how successful it’s been. A recent estimate claimed the service already counts 33.6 million subscribers. That would be a smashing success compared to Disney+’s 23.1 million subscribers, but Apple hasn’t crowed about the numbers at all.
Even though The Morning Show earned a couple of Golden Globe nominations, it doesn’t seem as though Apple TV+’s content has made much of a dent in pop culture. To be fair, Apple TV+ is still in the earliest stages of infancy. But it’s seriously lacking in the content department when compared to its rivals. It’s hard to see how Apple is going to ramp up its TV show production to get on Disney and Netflix’s level anytime soon.
Most current Apple TV+ subscribers are probably riding the free 12-month trial Apple handed out with new iPhones, iPads and Macs. Will Apple actually have any shows that make people stick around once the free trial wave breaks? The company might need to make a major Hollywood acquisition if it wants to keep up.
When will Apple resolve AirPods Pro supply problems?
Apple has a breakout hit on its hands with AirPods Pro. The only problem: Apple continues to struggle to keep up with demand. The company is likely leaving a lot of money on the table in the process.
You still must wait nearly a month for AirPods Pro to ship from Apple’s online site. (Regular AirPods, without the noise-canceling feature, ship immediately.) The AirPods Pro supply constraint comes as wearables become an increasingly important revenue source for the iPhone-maker. Last quarter, revenue from Apple Watch and AirPods increased 54% year-over-year, bringing in $2.2 billion. Hopefully, Apple can get its supply issues ironed out soon to get its money-making machine in full gear.
How much more can services grow?
Apple leveled up its services game throughout 2019. Now it’s time so see whether the war chest of services will continue to pay off. Apple TV+ probably isn’t going to make a ton of money this year, but there’s also Apple Arcade, Apple Music, Apple Books, Apple Card, iTunes, the App Store, iCloud, Apple News+ and probably a couple of other “Apple” things I’ve already forgotten.
With an active device base topping 1.5 billion, Apple only needs a small percentage of customers to sign up for a few of its services to make an obscene amount of money. Strong guidance for Q2 2020 will indicate how confident Apple is in its services, which now provide an anchor after iPhone sales hit rocky waters.
Another big question on investors’ minds will be, “What’s next for Apple?” Tim Cook continues to drop hints that Apple plans to make a huge impact on health care. Will 2020 be the year Apple Health becomes a thing?