The first day of May will bring investors the biggest earnings event of the week — quarterly results from Apple (AAPL).
After the market close on Tuesday, the world’s largest company by market cap will report results for its fiscal second quarter, with much of the focus likely to be on iPhone sales and whether demand for the company’s flagship device is flagging.
Wall Street expects the company will report earnings per share of $2.65 on revenue of about $61 billion, according to estimates from Bloomberg. The company is expected to report iPhone shipments of just under 51 million in the quarter, according to estimates from Oppenheimer.
But as Yahoo Finance’s Dan Howley noted in a preview of the company’s report, concerns around Apple’s future have bubbled up in the last few weeks after some its suppliers reported weak guidance while questions still linger around whether Apple made the right move by debuting its flagship iPhone X alongside an updated, but less souped-up, iPhone 8.
In a note to clients ahead of the report, Oppenheimer analyst Andrew Uerkwitz lowered estimates for the company, writing that, “The evidence is mounting for Apple’s growth problem — the company is a victim of its own success.”
Uerkwitz notes that while new services like Apple Music and new products like Apple Watch and AirPods have had some success, “penetration of those newer products/services in the current Apple installed base is in low-single digits.”
Adding, “We believe this is evidence that Apple’s ecosystem appeal is not compelling enough to counter structural issues and expand niche categories among its users. And this is bad for growth.”
And so while many expect the company to increase its capital return program alongside its earnings announcement on Tuesday, Apple still faces what Uerkwitz calls a “structural headwind” — the declining excitement around iPhones.
It’s been over ten years since Apple announced its first iPhone. The iPhone is the most successful and significant consumer product since its inception. How long the company continues to wow consumers with incremental improvements in iPhone, however, remains an increasingly open question for some analysts.
And on the economics side, Tuesday will bring investors a reading on auto sales in April, as well as readings on manufacturing activity in the manufacturing sector from Markit Economics and the Institute for Supply Management.
Both the Markit and ISM reports will be watched for signs of pricing pressure in the manufacturing space, a sign that more widespread inflation in consumer prices could be coming soon.
Investors will also on Tuesday wake up to one of the most pervasive market clichés around — “Sell in May and go away.”
The saying draws its origin from the seasonal weakness of the period between May and October, when stocks have been higher just 63% of the time with an average return of 1.5%, the worst among all possible six-month rolling periods for the market, according to data from LPL Financial Research.
And so on the one hand, the data suggest that investors with time horizons sensitive enough to the likely path for the stock market over the next six months should indeed be aware of what history says about performance during this period.
On the other hand, investors with longer time horizons can be comforted, perhaps, that while stocks underperform on a relative basis during the summer months, they still go up. Usually.
Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
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