[Earnings Preview] Can Apple get out of 4 consecutive sales declines? Pay attention to Vision Pro and AI!

According to market consensus, Apple's fourth quarter sales compared to the same period last year$0.95% increase to $118.262 billion, EPS compared to the same period last year$2.11, up 11.99%It is expected.

Sales of 2023Q4 and Apple were 89.50 billion dollars, down 0.72% from the same period last year, and diluted EPS was 1.46 dollars, up 13.18% from the same period last year.

Apple did not show clear guidance during the financial results briefing for the previous quarter. The company's Luca Maestricfo said sales for FY24Q1 are expected to be “almost similar” to the same period last year.

Since the launch of the iPhone 15 series, the market has continued to criticize its lack of innovation. Investment banks lowered Apple ratings one after another at the beginning of 2024 due to sluggish iPhone sales forecasts.

Are iPhone sales going well?
At the beginning of the year, analysts at Barclays revised their sales forecasts for iPhone in January and wearables for the fourth quarter downward. Compared to previous forecasts, both sales and EPS declined in the first half of the single-digit range.

The iPhone, which accounts for 50% of sales, remains Apple's most important product. Barclays pointed out that “concerns continue to be expressed about the sales volume and product mix of the iPhone 15, and there are no features or upgrades that enhance the appeal of the iPhone 16.”

Meanwhile, despite analysts continuing to lower iPhone sales forecasts, according to the latest International Data Corporation (IDC) report, iPhone shipments surpassed Samsung in the fourth quarter and the full year of 2023primacyIt became.

Vision Pro and expectations for AI
Apple expects sales volume of Vision Pro to be 500,000 units in 2024. In that case, it would at least bring sales of 1.75 billion dollars to the company. BofA Securities raised Apple's rating from “neutral” to “buy,” and the target stock price was also raised from 208 dollars to 225 dollars.

The analyst stated, “In the long run, as VR becomes mainstream, there is a possibility that Vision Pro sales will exceed iPad sales.” Also, demand for iPhone upgrades will intensify due to the need for cutting-edge hardware to realize artificial intelligence functions, and it is expected that the growth of Apple services will also increase as monetization of the installation base progresses.

Meanwhile, Mr. Ming-Chi Kuo, a famous analyst in the Apple community, pointed out that “as core users make purchases, the positioning of Vision Pro does not match general consumer goods, so there is a risk that demand for this product will weaken in the future.” Since Apple is lagging behind in AI, it was also predicted that it would be difficult to have a growth engine for smart cloud businesses such as Microsoft, NVIDIA, Google, etc.

How do you look at the EU App Store and iPhone feature reviews?
Apple announced on the 26th that it will completely review iOS, Safari, and app store functions provided in the EU in accordance with the EU Antimonopoly Law. Goldman predicts that the impact of this change on profits will remain less than 1%.

Also, according to J.P. Morgan, Europe accounts for 6% of Apple's App Store sales, and there is a high possibility that the decline in revenue due to the decline in fee rates will be compensated by new fees for software downloads from outside the App Store.

Meanwhile, J.P. Morgan stated that although the impact of this change is limited, there is a possibility that Apple will embark on reforms in other fields in order to appease regulators.

Antitrust lawsuits could be a new risk
For the time being, Apple is imposing unfavorable restrictions on hardware and software against competitors, so there is a possibility that it will face antitrust law violation lawsuits from the US Department of Justice. There is also a risk that antitrust lawsuits will put pressure on Apple's stock price.

Bloomberg reported that this lawsuit can be filed as early as March. It also added that senior antitrust executives in charge of the Department of Justice have not yet approved the lawsuit, so there is a possibility that it will fall behind.