Apple Q3 F17 earnings are coming up after the bell this afternoon, although the company is pretty much getting a pass this time around as investors and analysts whet their appetite for the rumored iPhone 8 even further. Nonetheless, the world is listening whenever Apple management is talking, so here’s what to expect tonight.
What to watch for in Apple Q3 F17 earnings
Apple stock seems to have stabilized ahead of its fiscal third-quarter results after skidding over the last few trading sessions. Interestingly, analysts have been trimming their estimates since the end of the company’s last quarter. Consensus for Apple Q3 F17 earnings now stands at $1.57 per share on $44.89 billion in sales, versus the $1.62 per share that was estimated on $45.62 billion in revenue that was estimated at the end of March.
However, analysts are shifting their price targets in the opposite direction, notes MarketWatch, with the FactSet average price target rising 7.8% to $163.20. At the end of March, the average price target for Apple stock stood at $151.39.
What will AAPL stock do after earnings?
So what will happen to the stock after Apple Q3 F17 earnings? Seeking Alpha contributor Kwan-Chen Ma examined post-earnings share moves for Apple and found a $1.90 change in the stock price for every $100 million in revenue surprise. For every 1 cent per share in earnings surprise, the stock has moved by $4.04, he adds.
After analyzing reactions to guidance, he found that Apple stock has risen 83 cents for every 1% management has guided up in sales. Consensus for September quarter sales stands at around $50 billion currently. He also claims that the shares have changed by $2.59 for every 1% change in gross margin guidance. Additionally, he estimates that the shares have rallied by $4.59 for every 1% they are undervalued following an earnings report. He adds that Apple stock is now 3% undervalued based on the mean price target from analysts reporting to Thomson Reuters.
To come up with these numbers, he looked at the five-day post-earnings moved in Apple stock based on “adjusted surprises” over the last five years. Based on all of these numbers, he sees the potential for upside of $13 a share for the stock following Apple Q3 F17 earnings tonight, although he admits that this is probably highly optimistic.
It’s not so simple with Apple Q3 F17 earnings
However, this year is anything but normal for Apple because of the widespread speculations about the iPhone 8. Apple management even obliquely referenced these rumors with the company’s last earnings report, blaming them for the disappointing iPhone sales. On the earnings call, CEO Tim Cook mentioned “a pause in purchases of iPhone, which we believe is due to the earlier and much more frequent reports about future iPhones.”
In a note to investors dated July 25, UBS analyst Steven Milunovich that June quarter earnings can trigger “significant stock moves” because in a way, they offer a sneak peek at management’s expectations for the next iPhone cycle. In his analysis, he found that Apple stock usually rises as long as consensus estimates for sales are toward the top end of management’s guidance for the September quarter.
However, he feels that a big increase is unlikely following Apple Q3 F17 earnings because of the risks of a delay in the OLED panels for the iPhone 8. This expected delay will have an impact on the company’s September quarter and possible the December quarter as well. He does see upside in Apple stock as being possible “if management sounds quite bullish.” He adds that uncertainty on the timing of the iPhone will remain because even in the best-case scenario, it won’t ship until the middle of next month.