This week, the financial reports of technology giants are coming one after another! The current "global market cap leader" $Apple (AAPL.US)$ will also announce its financial performance for the fourth quarter of the 2024 fiscal year (i.e. the third quarter of 2024) after the market closes on October 31.

Analysts' latest forecast predicts that Apple's Q4 revenue will be $94.316 billion, a year-on-year increase of 5.38%; earnings per share of $1.53, a year-on-year increase of 4.77%.

From a business perspective, according to Bloomberg's consensus expectations,

In terms of hardware, as Apple's "flagship product", the iPhone is expected to achieve revenue of $44.965 billion, a year-on-year increase of 2.65% and a quarter-on-quarter increase of 14.42%; Mac is expected to achieve revenue of $7.749 billion, a year-on-year increase of 1.77% and a quarter-on-quarter increase of 10.6%; iPad revenue is expected to reach $7.084 billion, a year-on-year increase of 9.94% and a quarter-on-quarter decrease of 1%; Wearables, Home, and Accessories revenue is $9.159 billion, a year-on-year decrease of 1.75% and a quarter-on-quarter increase of 13.12%.

The most profitable segment - the services business is expected to achieve revenue of $25.269 billion, a year-on-year increase of 13.24% and a quarter-on-quarter increase of 4.4%.

Overall, in the fourth quarter, Apple's core iPhone business is expected to grow after two consecutive quarters of decline, while the services business continues to show strong momentum.

Since the beginning of this year, tech giants have shown strong momentum and have become the main driving force behind the rise in the US stock market. Apple's cumulative increase is over 20%, and the stock price has also reached a historic high, with a total market cap of nearly $3.6 trillion. With the boost of the AI frenzy, Apple is expected to further break through its 'ceiling'.

Wedbush Securities analyst Dan Ives recently stated that Apple is expected to become the first company with a market cap of $4 trillion by 2025, followed by Nvidia.

As early as June this year, Wedbush called Apple's announcement about AI capabilities a 'historic moment,' pointing out that this could be the catalyst for Apple to reach a market cap of $4 trillion within a year.

Wedbush also pointed out that driven by the AI-driven upgrade cycle, Apple's iPhone sales in 2025 may exceed 0.24 billion units, which could be the highest iPhone sales year in the company's history.

Looking back at its performance in the third quarter of the 2024 fiscal year, Apple's revenue reached $85.78 billion, a year-on-year increase of 4.9%. Net income was $21.45 billion, a year-on-year increase of 7.9%, both surpassing market expectations.

It is worth noting that benefiting from the strong performance of iPad and service revenue, Apple has exceeded revenue and profit expectations for six consecutive quarters, setting all-time highs for total revenue and EPS in June quarter, with service revenue hitting new highs for six consecutive quarters. However, the decline in performance in the China market exceeded market expectations.

Looking ahead to this quarter's performance, investors will focus on the revenue contribution of Apple's product lines including iPhone, iPad, Mac, Vision Pro, Home and Accessories, as well as the market performance of the newly launched iPhone 16 and Apple Intelligence functionality.

Will the release of the first AI smartphone sweep away the decline in the Greater China region?

• Apple AI is about to officially launch.

The strong performance of Apple's stock price is inseparable from the market's optimistic attitude towards the future development of artificial intelligence technology, especially with the recent launch of the first AI phone, the iPhone 16, and the Apple Intelligence feature, demonstrating Apple's further commitment in the field of AI.

In fact, among the mainstream mobile phone manufacturers in the 'AI war,' Apple is one of the latest entrants into AI. It wasn't until May 2024 that Apple announced a new move in the AI field, and Apple's stock price has since started a wave of upward trends.

However, the market generally holds a pessimistic attitude towards Apple Intelligence sparking an iPhone sales frenzy in the short term.

Prominent tech journalist Mark Gurman stated after trying the Apple Intelligence feature in the iOS 18.1 version that the functionality has not met people's expectations.

Renowned Apple analyst Ming-Chi Kuo pointed out that from the fourth quarter of 2024 to the first half of 2025, about 10 million units of iPhone 16 will be cut in production. Although some market participants optimistically anticipate a dramatic increase in iPhone shipments due to Apple Intelligence in the short term, Apple's decision to cut production at this time may indicate low chances of realizing these optimistic expectations in the short term. He mentioned that significant growth in iPhone shipments may still require more hardware innovation to achieve.

Canalys analysts provide a more optimistic outlook: 'Although the initial response is average, with Apple Intelligence expanding to new markets and supporting more languages, it is expected that the iPhone 16 will help Apple maintain strong growth in 2024 and continue this momentum into the first half of 2025.'

• Apple re-enters the top five in the Chinese market.

On the other hand, Apple is also facing competition from other smart phone manufacturers, especially in the declining sales of the Chinese market, where Apple's market share is no longer as strong as domestic competitors.

According to previous financial report data, Apple's revenue in the Greater China region in the first quarter of 2024 decreased by 13% year-on-year, with a slight decrease in the second quarter, but still down by 6.5% year-on-year.

However, with Apple launching multiple discount promotions and the release of the iPhone 16 series, Apple has returned to the top five in smart phone market share in China. The latest statistics from market research firm IDC show that Apple ranked second in China with a 15.6% market share in the third quarter, but the share decreased slightly by 0.5% compared to the same period last year.

It is worth noting that in the face of declining sales in the Chinese market, Apple CEO Cook has frequently shown goodwill to China. Recently, Cook made his second visit to China this year, marking his tenth 'China trip' since becoming Apple CEO.

During this visit to China, Cook met with several Chinese government departments and enterprises. Cook emphasized that Apple is willing to actively grasp the opportunities of China's opening up to the outside world, continuously increase investment in China, and help promote the high-quality development of the industry chain supply chain. Cook also stated that Apple will continue to focus on long-term development in China, increasing investment in the supply chain, research and development, and sales in China.

According to the latest research report from the well-known Wall Street investment firm Wedbush Securities, sales of Apple's newly launched iPhone 16 series in the first three weeks in China increased by 20% year-on-year. This data signifies a comprehensive revival of Apple's growth momentum, as the launch of the iPhone 16 leads the start of the AI super cycle, Apple's iPhone sales in the Chinese market are expected to achieve a strong rebound in the next year.

How do Wall Street analysts view this?

Currently, major banks have varying opinions on Apple's future stock price trend. According to Bloomberg, the stock currently has 39 buy ratings, 18 hold ratings, and 3 sell ratings. Most institutions still bullish on its future prospects. Analysts are closely watching the recent performance of the iPhone 16 series, the official launch of Apple's AI, and the latest developments in service revenue.

Goldman Sachs has reiterated a buy rating on Apple and set a target stock price of $256. The bank's analysts pointed out that with Apple's launch of the Apple Intelligence platform, focusing on software evolution, the iPhone 16 cycle will be different from previous product cycles.

For the fourth quarter of 2024 (corresponding to the third quarter of 2024), Goldman Sachs predicts iPhone shipments to be 52 million units. In the first quarter of 2025 (corresponding to the fourth quarter of 2024), shipments are expected to reach 80 million units, with a slight increase in average selling price compared to the same period last year.

The bank's analysts expect performance guidance to exceed expectations, believing that with the support of new AirPods, MacBook, and iPad, the revenue from various products will grow, potentially driving sales beyond current market expectations.

In addition, Goldman Sachs also expects service revenue to grow by 14% over these two quarters, providing further support for the company's revenue. Goldman Sachs emphasizes that due to the effect of product mix and revenue leverage, Apple's gross margin may exceed expectations, expected to reach 45.5% to 46.5%.

Goldman Sachs' latest research report forecasts Apple's fourth-quarter revenue at $94.5 billion, earnings per share at $1.61, both higher than market expectations. The bank has a target price of $275 and rates the company as 'buy'. Goldman Sachs also points out that Apple will benefit in the current quarter from stable demand for the iPhone, new products in the Mac series, and the newly launched iPad Mini. Furthermore, due to factors such as long-term growth in app spending and increased penetration of Apple services, the service business will continue to grow significantly.

However, there are also analysts who hold a more pessimistic view of Apple's future.

KeyBanc has made a significant adjustment to its rating on Apple, downgrading it from sector weight to underweight and setting a target price of $200. The analyst pointed out that expectations for a comprehensive rebound in all of Apple's businesses seem 'unrealistic'. Despite Apple's recent launch of new products like the iPhone, concerns about its sales prospects and valuation in the market are escalating. This is also the first time in three years that the institution has taken a bearish stance on Apple since covering the stock.

Barclays believes that due to shorter delivery times compared to last year, the supply of the iPhone 16 still shows demand lower than expected, especially in the US and China. The company rates Apple as 'sell' with a target price of $186.

How has the stock price performed on past earnings days?

According to Market Chameleon, backtesting the performance days of the past 12 quarters, Apple has a relatively high probability of rising on the day of earnings release, about 67%, with an average stock price change of ±3.6%, a maximum decline of -4.8%, and a maximum increase of +7.6%.

Currently, Apple's implied change is ±3.9%, indicating that the options market bets on a single-day price change of 3.9% after its earnings; in comparison, Apple's average stock price change after the previous 4 quarters was ±2%, indicating market expectations of increased price volatility this time.

From the skewness of the options volatility, the market sentiment towards Apple is slightly bearish.

Editor/rice