Wall Street Prepares for Apple Earnings Under New CEO

Apple Inc. shares head into Monday’s quarterly earnings report up 27% for the year as of Friday’s close, outpacing Apple’s leading peers as Wall Street prepares for the first major financial test under new Chief Executive Officer John Ternus.

The Bottom Line:
• Apple shares have risen 27% this year through Friday’s close, making the company Wall Street’s preferred megacap tech stock heading into earnings.
• Bank of America analyst Wamsi Mohan noted a conservative outlook due to gross margin concerns, projecting margins will drop from the June quarter’s 49.3% to between 47.5% and 48% for the September period.
• IDC reports the global smartphone market is set to drop nearly 17% this year, while PC shipments could fall 11% amid surging component costs for memory and flash storage.

Ternus Faces Wall Street After a Month of High-Profile Product Launches

John Ternus took over as chief executive officer from Tim Cook on September 1. Nine days into his tenure, Ternus unveiled the iPhone Duo at Apple’s headquarters. The $2,000 foldable phone did not go on sale during the quarter that ended last month, officially hitting shelves on October 23. Preorders for the device quickly slipped into estimated ship dates in 2027 due to limited supply.

Reports indicate that the Duo can crack under normal use. Apple acknowledged the issues last month and stated they affected a small number of devices. Ternus has maintained a busy public schedule since taking the helm, walking the red carpet at the Emmys, opening an Apple store in New York for the iPhone Pro launch, kicking off sales of the iPhone Duo in Austin, Texas, and appearing on the cover of Time magazine.

Last week, Ternus introduced the first MacBook with a touchscreen, following the spring launch of the low-cost MacBook Neo. Monday’s earnings call marks his first in-depth financial review as CEO, having previously deferred to Cook during past calls.

Barclays Maintains Underweight Rating on Component Pressures and AI Uncertainty

Analysts at Barclays wrote in an earnings preview over the weekend that they remain cautious on the stock given iPhone uncertainties this cycle, limited monetization of artificial intelligence, and renewed fears regarding the App Store. The firm maintains an underweight rating on the shares, noting that pricing benefits Apple previously enjoyed from the memory backdrop due to its scale and preferential pricing are fading.

Bank of America analyst Wamsi Mohan expressed a conservative outlook on earnings on Friday, pointing to gross margin concerns and price increases. Mohan noted that Apple’s gross margins in the September quarter will receive a positive impact from tariff refunds, but warned that margins could drop in the coming quarters. Apple reported a gross margin of 49.3% in its June quarter, previously warning it would range between 47.5% and 48% in the September period. Bank of America maintains a Buy rating on the stock with a price target of $370.

Smartphone and PC Markets Grapple With Severe Memory Shortages

Consumer electronics companies are contending with surging prices for computer parts, including the memory and flash storage utilized in every smartphone and laptop. IDC’s Ryan Reith told CNBC that Apple is competing in a smartphone and PC market that has never been worse. Intel experienced its worst day on the stock market since the 1970s on Friday, dropping 29% after citing PC softness for a disappointing forecast.

Many firms have responded to component shortages by raising prices or reducing specifications for current devices. Consumers are retaining their old computers for longer periods, driving overall sales down. IDC projects the smartphone market will drop nearly 17% this year based on shipments, with PCs declining 11%. Apple raised prices across almost all of its products after executives warned over the summer that the market was experiencing a thousand-year flood.

Despite these headwinds, Apple remains the preferred megacap tech stock on Wall Street. Investors have recently scrutinized hyperscalers for hefty expenses and dwindling cash flows, whereas Apple has maintained a more measured approach to artificial intelligence spending and avoided massive capital expenditure bills.

Disclaimer: The information provided in this article is for educational and market analysis purposes only and does not constitute financial, investment, or legal advice. Always consult with a certified financial professional before making investment decisions.

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