Jon Hadad

About the Author Jon Hadad

Jon Hadad graduated from the University of Delaware with a degree in political science. Prior to joining the Smarter Analyst team, he was an industry analyst at a New York research firm.

Last Minute Thought: Buy or Sell Apple (AAPL) Stock Before Fiscal Q2’19 Earnings?

Apple (AAPL) is scheduled to release second-quarter earnings in just a few minutes, and investors will be keeping a close eye on iPhone sales and China performance.

The company released Q2 guidance calling for revenue to decrease between 3% and 10% from this quarter last year, to $55-$59 billion, but investors still have pushed the stock up about 30% since the beginning of the year. Rosenblatt analyst Jun Zhang isn’t buying the rally, as he remains Neutral on Apple stock with a $150 price target, which implies nearly 25% downside from current levels.  (To watch Zhang’s track record, click here)

Zhang does not expect much from Apple’s impending earnings update. The analyst believes the company continues to face sell-through pressure, with share losses to Huawei and Samsung in China and European markets, but does not think the company has changed their C2Q production and shipments yet. The analyst expects iPhone shipments to drop quarter-over-quarter, which may explain Apple’s own lower revenue guidance, as iPhone is the driver of the majority of Apple revenue.

On the iPhone, Zhang believes the company will launch three new models in September, but estimates a production drop between 5-10% between 2H18 and 2H19. Overall, the analyst expects Q2 new iPhone shipments to decrease to 38 million units, followed by 39 million and 63 million in Q3 and Q4, respectively (both decreases year-over-year). But decreased volume is not the only challenge: Zhang says Apple’s biggest challenge is “the continuation of iPhone XR price cuts.” Should this continue, Zhange does not believe it will be positive for new iPhone model sales.

However, while the analyst is not expecting much support from iPhone, he still believes Apple will “report an in-line F2Q quarter, as well as an in-line F3Q quarter.” He says, “risks to the company will be mainly in the second half of this calendar year (further market share loss in key markets such as China and European market),” but that the company will maintain gross margin, “even with meaningful memory price declines,” which the analyst thinks will offset  gross margin impacts from iPhone XR price cuts.”

All in all, while Apple stock had a rocky 2018 — rising and falling as much as 30% — 2019 is quickly showing signs of old, with shares up nearly 30%. Butt perhaps this is a result of the greater bull market, and not Apple itself. TipRanks analysis of 36 analysts shows a consensus Moderate Buy rating for the stock, with 17 analysts recommending Buy, 17 on the sidelines and two Suggesting Sell.

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