Apple in a Tough Spot Ahead of its Earnings Report

Apple Q4 FY24 Preview

The Magnificent Seven have delivered mixed quarterly results this week. Microsoft shined with its AI-fueled cloud revenue growth and Amazon.com posted another impressive quarter. Meta Platforms reported record top and bottom lines, but its ad warning created some concerns, while Alphabet's AI messaging underwhelmed despite generally strong results.

Focus now shift to Apple, which reports its Q4 FY 2024 earnings on Thursday November 2, against a challenging backdrop.

The tech behemoth comes from three straight quarters of negative growth and does not expect that to change with Thursday's results. iPhone sales, its main revenue engine, have sagged against weak smartphone demand globally.

Furthermore, its reliance on China for sales and production creates some skepticism, given the fraught Sino Western relation and tech trade curbs. Research from Counterpoint suggests weak early China sales of the new iPhones, which launched a few weeks back. ^[1]

Apple also unveiled its entry into the mixed reality headset market, with the Vision Pro, scheduled for early-2024 release. This will likely be a niche product at first, taking into account the nascent state of the market and the hefty price tag, which is prohibitive for mass adoption.

There is concern that Apple may be missing out on the generative AI boom, sparked by ChatGPT. The company is tight-lipped baout its plans, so we will be eagerly awaiting for any insights, since the technology has the potential to unlock tremendous value for the Cupertino-based firm.

Stock Analysis

AAPL.us rallied in the first half of the year along with the broader tech sector and reached all-time highs in July (198.35). After that however, it started to decline and the fall accelerated by August's poor earnings. ^[2]

The stock registered a negative third quarter and extends the correction this month, testing critical tech levels. It has breached the EMA200 and the 38.2% of the 2022 low/2023 high rally, which creates risk for further losses towards and beyond 152.46.

On the other hand, the Relative Strength (RSI) moves to oversold territory, which can contain AAPL.us and help it rebound. It will need a catalyst for meaningful recovery though, as the upside does not look friendly.

Investor seem to be weary of the stock's high valuation, given the lack of revenue growth and innovation, against a still challenging external environment. Having said that, Apple is one of the most valuable companies in the world, often seen even a safe haven. It has a vast and loyal consumer base and despite the slowdown in device sales, its Services business goes from strength to strength. The next leg of the move can be determined by Thursday's quarterly report, which comes at a tough period and the firm will need to deliver.