On Tuesday, April 30, Apple will announce their financials earnings for the second quarter of 2019. This figures are expected to be at the midpoint of their guidance from the first quarter financials conference call. That is, somewhere between $55-59 billion in revenue.
If those earnings figures are true, and most analysts believe the are true, that means that Apple will be down bought 5-6% from Q2 2018. Add these two facts together – midpoint of guidance and a drop in revenue year-over-year – you can fully expect Apple stock to get punished in the days after the call. I’ll happily be wrong but I’m betting I won’t be.
By any measure, $55 to $59 billion in earnings should be praised by the market. But the market as a whole, not just the tech sector, is so overly indexed for growth that even hitting your projected financials simply aren’t good enough any more. There are a world of problems with this fact and Apple is going to bear the brunt of them come Tuesday.
The biggest problem is the negative press the results will generate. I can all-but promise you that in the 24-72 hours after the financials are released, there will be doom and gloom stories of how Apple is done, how Apple can’t innovate, how they are strangled with sluggish iPhone sales, how China is an Albatros around their neck. Etc, etc, etc.
Let’s be honest. iPhone sales are sluggish. China is a challenge for them – a big one. But the fact that the company is in the process of shifting from a hardware-focused company to a services-focused company should not be forgotten. It will be of course, but it shouldn’t be.
Shifting from a hardware based company to a services based company is really hard. I know, I’ve done it. It is gut wrenching at times and your financials always take a kick in the crotch in the process. But when it is complete, you always come out better and the market, magically, thinks you are the greatest thing ever.
Finally, don’t expect much improvement in the third quarter either readers. Apple is likely going to be in the same position in three months time. The transition will still be in full swing and it will likely be the forth quarter before we really see any growth. There is no reason to panic at the disco. Just like Apple, I encourage you to look at the long game here and avoid the doom and gloom of the next few days. If we are having this conversation in April 2020, then maybe there is room for concern.