Apple (NASDAQ:AAPL) is set to unveil its fiscal Q2 2024 earnings after Thursday’s market close. Currently, it stands as the second weakest performer among the “Magnificent 7” stocks, trailing behind Tesla (NASDAQ:TSLA), which recently rebounded following its late April earnings report.

Tesla exceeded expectations during its Q1 report despite initially low anticipations, prompting a surge in its stock price. Could Apple experience a similar boost post-earnings, benefiting from subdued expectations? We’ll delve into this, starting with a glance at Apple’s earnings projections.

Apple’s Fiscal Q2 Earnings Projections

Analysts predict Apple’s fiscal Q2 revenues to reach $90.6 billion, marking a 4.5% year-on-year decline. Although Apple’s December quarter revenues surpassed estimates with a 2% increase, the preceding four quarters saw consecutive revenue declines, a rare occurrence for the tech giant.

During its Q1 earnings call, Apple hinted at expecting revenues, including iPhone revenues, to remain on par with last year, once adjusted for the $5 billion pent-up demand surge observed in the March quarter. Consequently, analysts’ forecasts align closely with Apple’s guidance.

Market Concerns and Outlook

Market sentiment, particularly regarding iPhone sales in China, remains cautious. China stands as Apple’s second-largest market, where it faces stiff competition from Huawei, which has made significant strides post-U.S. sanctions. Some Huawei models directly challenge Apple’s iPhone 15, further compounded by a slowing Chinese economy, affecting iPhone sales.

Apple’s expected earnings per share (EPS) decline by approximately 0.66% in the recent quarter. Unlike its peers like Alphabet (NASDAQ:GOOG), Meta Platforms (NASDAQ:META), and Amazon (NASDAQ:AMZN), which implemented significant cost-cutting measures, Apple opted for a less aggressive approach, refraining from widespread layoffs, thereby not witnessing similar profit surges.

Key Points to Monitor

Apple’s commentary on its China operations and iPhone sales outlook will be pivotal during the earnings call. Additionally, attention will focus on the sales performance of Vision Pro, launched in February, and insights into the company’s artificial intelligence (AI) endeavors teased by CEO Tim Cook.

While expectations hint at potential AI announcements during the Worldwide Developers Conference in June, analysts may seek management’s insights into integrating more AI features into Apple’s products.

Investment Outlook

Ahead of Apple’s Q2 earnings, Bernstein upgraded the stock from “market perform” to “outperform.” Despite maintaining its target price at $195, Bernstein views the recent stock decline as excessive, advising investors to capitalize on the dip.

Aligned with Bernstein’s perspective, there’s optimism regarding Apple’s potential. Despite concerns over stagnant iPhone sales, AI-driven innovations could stimulate a significant replacement cycle, as anticipated by JPMorgan analyst Samik Chatterjee.

While Apple has yet to fully embrace the AI trend, its reasonable valuations and the possibility of a post-earnings rally make AAPL stock an attractive option amidst the current market sentiment, which appears overly pessimistic for 2024.

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