On January 3rd 2022, Apple became the first-ever company to achieve a $3 trillion market value. But since then, its share price has dropped observably, resulting in Apple losing its status as a $3 trillion company. But can its upcoming Q2 ’22 earnings provide an opportunity to help push Apple’s market cap to $3 trillion once again? This article will explore two key things to look for in Apple’s Q2 ’22 earnings report and how it could impact its share price.
EPS and Revenue Forecasts
Despite Apple facing many macroeconomic challenges, including supply chain constraints and soaring inflation, analysts are still fairly optimistic about its earnings. According to Investing.com, the consensus EPS forecast for the quarter is $1.43, down 2.05% from the reported EPS for the same quarter last year. While they estimate Apple will report revenue of $94.11 billion for the quarter, up 5.06% from the reported revenue for the same quarter last year.
Investors will want to watch closely how many sales Apple reports for its flagship product, the iPhone. Despite CEO Tim Cook stating that they’re upbeat on sales for 2022, macroeconomic challenges continue to persist and could hamper sales. According to the Nikkei business newspaper, Apple is planning to cut some of its iPhone production rates with the iPhone SE model set to be cut by 20% due to slowing demand, surging inflation and supply chain disruptions.
If Apple does miss revenue expectations, especially for its iPhone models, it could negatively impact its share price. Some investors are already unsure how the company can expand its revenue, and if growth is also slowing, it could tempt investors to sell their positions.
Potential Stock Buyback and Dividend Hike
Citi analyst Jim Suva expects Apple to declare a stock buyback and a dividend hike soon, and it may be announced in its upcoming Q2 ’22 earnings report. Suva estimates that Apple is likely to announce a buyback of $80 billion to $90 billion while increasing its dividend by 5% to 10%. This seems a sensible way for Apple to employ excess cash, given that it’s supposedly sitting on a $200 billion cash pile.
Stock buybacks and dividend hikes generally raise a company’s share price. So, if Apple does announce a buyback in its upcoming earnings report, it could help increase its share price even if it misses earnings expectations.
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