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Apple (AAPL) is scheduled to report results of the first fiscal quarter of FY24 after the market close on Thursday, February 1, with a conference call scheduled for 5:00 pm ET. What to watch for:

LAST QUARTER: Last quarter, Apple beat consensus sales and earnings expectations, reporting EPS of $1.46 on Q4 revenue of $89.5B, which compared to consensus forecasts of $1.39 and $89.35B, respectively.

At that time, Apple CEO Tim Cook said: "Today Apple is pleased to report a September quarter revenue record for iPhone and an all-time revenue record in Services. We now have our strongest lineup of products ever heading into the holiday season, including the iPhone 15 lineup and our first carbon-neutral Apple Watch models, a major milestone in our efforts to make all Apple products carbon neutral by 2030."

Current consensus EPS and revenue forecasts for Apple's December-end quarter stand at $2.10 and $117.91B, respectively, according to data from Refinitiv.

Consensus EPS and revenue forecasts for Apple's March-end quarter stand at $1.57 and $95.95B, respectively, according to Refinitiv.

DOWNGRADES AND BEARISH COMMENTS: Subsequent to that report, Jefferies analyst Andrew Uerkwitz said Apple "delivered a solid quarter" that featured EPS beating the consensus forecast and record September quarter revenues for iPhones and Services. However, December guidance, laptop sales and tablet sales all disappointed and the firm sees questions "lingering," pondering "is it timing, tough comps, or some deeper issue with demand?" The firm kept a Buy rating on Apple shares.

More recently, on January 2, Barclays downgraded Apple to Underweight from Equal Weight with a price target of $160, down from $161. The company's iPhone 15 has been "lackluster" and iPhone should be the same, the analyst tells investors in a research note. Meanwhile, Apple's other hardware categories should remain weak, and Barclays does not see its Services growing more than 10%, says the analyst. The firm expects "reversion" in 2024 after a year when most quarters were missed and the stock outperformed. Barclays slightly lowered Apple estimates following another round of checks as it is still picking up weakness on iPhone volumes and mix, as well as a lack of bounce-back in Macs, iPads and wearables.

On January 4, Piper Sandler downgraded Apple to Neutral from Overweight with a price target of $205, down from $220. The analyst cites valuation concerns and broader handset and macro weakness in the first half of 2024 for the downgrade. The firm is starting 2024 with a cautious stance on semiconductors, believing that the first half of the year will be challenging for the analog market, handset and consumer end markets. For Apple, Piper is concerned about handset inventories entering the year and also feels that its growth rates have peaked for unit sales. A deteriorating macro environment in China could also weigh on Apple's handset business, contends the firm.

On January 10, Redburn Atlantic downgraded Apple to Neutral from Buy with an unchanged price target of $200. While the firm expects the iPhone to return to growth in 2024, it sees little room for upside over the next few years, and says an "anticipated underwhelming" March quarter could impact confidence in this outlook. At the same time, there appears to be rising regulatory risk that may impact Apple's ability to monetize its ecosystem, the analyst tells investors in a research note. Meanwhile, with the stock's price-to-earnings multiple eclipsing Nike's (NKE) for the first time for an extended period, Redburn believes Apple's valuation "now appears full."

In a preview published on January 22, Bernstein said the firm was largely in line with consensus on revenues and EPS for Q1. Q1 guidance pointed to a weak iPhone 15 cycle, with company revenue up 32.7% compared to Q4, among the weakest in history, despite improved iPhone supply. While services is likely to continue to see strong growth, the firm believes that Apple's other product categories will also be weak. Looking forward, Bernstein thinks consensus is mis-modeling iPhone seasonality, and is notably below consensus revenues for Q2 and the remainder of the year. Given that there is widespread investor sentiment that the iPhone 15 is a weak cycle, the firm says a key question is whether tepid results and guidance are already priced in, similar to the iPhone XS and 14 cycles, where Apple strongly outperformed from Q1 results through year end. Bernstein has a Market Perform on Apple shares with a price target of $195.

Recently, Apple analyst Ming-Chi Kuo said in a post on Medium that his latest supply chain survey indicates that Apple has lowered its 2024 iPhone shipments of key upstream semiconductor components to about 200 million units, or down 15% year-over-year. Apple may have the most significant decline among the major global mobile phone brands in 2024, the analyst said, adding that iPhone 15 series and new iPhone 16 series shipments will decline by 10%-15% year-over-year in 1H24 and 2H24, respectively.

UPGRADE AND BULLISH DEFENSE: On January 18, BofA upgraded Apple to Buy from Neutral with a price target of $225, up from $208. The analyst sees a stronger multi-year iPhone upgrade cycle driven by the need for the latest hardware to enable generative artificial intelligence features to be introduced in 2024 and 2025. The firm also expects higher growth in Apple's Services as the company better monetizes its installed base. Apple's capital returns are strong and the stock remains under-weighted versus the S&P 500 Index, adds BofA, which believes AI features could induce institutional investors to increase positions. The firm calls the end of Apple's negative earnings revisions.

The next day, Evercore ISI analyst Amit Daryanani added Apple to the firm's "Tactical Outperform" list as the firm thinks buyside expectations are likely below current consensus, so an in-line quarter would likely drive upside. Apple stock has underperformed over the last few weeks, driven by worries ranging from China demand to watch bans to regulatory risk, but the firm thinks Apple should be able to report "modest upside" for its December-end quarter and guide to March-end quarterly results "in the zip-code of street expectations," the analyst tells investors. Evercore maintains an Outperform rating on Apple shares.

SLIPPING BEHIND MICROSOFT IN MARKET CAP: In mid-January, Microsoft surpassed Apple as the world's most valuable company after the iPhone maker had its worst start in years amid mounting demand concerns. As of the time of this writing, Microsoft's market capitalization was hovering near $3T, while Apple's market capitalization stands near $2.87T, according to data from Yahoo Finance.

VISION PRO: On January 8, Apple announced Apple Vision Pro will be available beginning Friday, February 2, at all U.S. Apple Store locations and the U.S. Apple Store online. "The era of spatial computing has arrived. Apple Vision Pro is the most advanced consumer electronics device ever created. Its revolutionary and magical user interface will redefine how we connect, create, and explore," said CEO Tim Cook.

On January 30, MacRumors' Juli Clover reported, citing a source with knowledge of Apple's sales numbers, that Apple had sold upwards of 200,000 Vision Pro headset units.

Wedbush analyst Daniel Ives noted Apple Vision Pro's official launch date of Friday, February 2. With strong pre-orders coming out of the gates over the first week, the firm now expects Apple to ship and sell roughly 600,000-plus headsets for 2024 versus its prior estimate of 460,000 given the demand trajectory and number of apps on the new form factor look robust and growing. This is just the start for Vision Pro, Wedbush says, adding that it believes this is the first step to Apple pushing into AI and eventually a separate AI App Store that Apple should discuss initially at WWDC this summer. In the firm's opinion, the ultimate goal for Apple is that Vision Pro will work alongside the iPhone and other Apple devices over the coming years with many consumer AI use cases set to explode across health, fitness, sports content, and autonomous. Wedbush has an Outperform rating on Apple shares with a price target of $250.

CHANGES IN EU OPEN "PANDORA'S BOX": On January 25, Apple announced changes to iOS, Safari, and the App Store impacting developers' apps in the European Union to comply with the Digital Markets Act. The changes include more than 600 new APIs, expanded app analytics, functionality for alternative browser engines, and options for processing app payments and distributing iOS apps, the company stated. "The changes we're announcing today comply with the Digital Markets Act's requirements in the European Union, while helping to protect EU users from the unavoidable increased privacy and security threats this regulation brings. Our priority remains creating the best, most secure possible experience for our users in the EU and around the world... Importantly, developers can choose to remain on the same business terms in place today if they prefer," said Phil Schiller, Apple Fellow.

Apple said that, as part of changes to iOS, Safari, and the App Store impacting developers' apps in the European Union to comply with the Digital Markets Act, changes to iOS include new options for distributing iOS apps from alternative app marketplaces; new framework and APIs for creating alternative app marketplaces; new frameworks and APIs for alternative browser engines; and an interoperability request form.

The next day, JPMorgan analyst Samik Chatterjee kept an Overweight rating on Apple after the company announced broad-based changes to its Services monetization model in the European Union. Apple will enable alternative app stores for consumers to download apps, and the ability to use alternative payment systems starting March of this year, and is charging a lower commission rate in the range of 10% to 17%, the analyst told investors. The firm says that while the changes impact the Services group in Europe only, they will increase the focus on the anticipated Department of Justice antitrust lawsuit and the likelihood of Apple making similar changes outside of Europe to appease regulators. The changes "can open Pandora's box with other regulators," JPMorgan contends.

PRODUCT HEADLINES: During the quarter, other reporting on Apple's products and production have included:

• Apple readies new iPads, M3 MacBook Air amid sales slump, Bloomberg says
• Apple to disable blood-oxygen feature on premium watches sold in U.S. due to patent fight with Masimo (MASI)
• Apple pushes launch of 'less ambitious' car to 2028 at earliest, Bloomberg says
• Apple buying AI startups, seeking AI talent, FT reports

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