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Apple (AAPL) Q1 earnings preview: Will 5G expectations outrun holiday sales?

Apple Inc. (NASDAQ: AAPL) is slated to report its first-quarter 2020 earnings results on Tuesday, January 28, after the market closes. The results will be benefited from the seasonal holiday demand. Investors are keen on the upcoming 5G technology cycle and the Cupertino giant is likely to put lights on it at the conference call.

The market experts believe that the company could be bringing out the 5G iPhone at this year-end. They believe that Apple will remain cautious with regard to the phone launch due to the slow adoption of 5G technology despite the strong enthusiasm among the consumers.

Apple iPhone 11 models
Courtesy: Daniel Romero on Unsplash

The development of smart cities, Internet of Things, and autonomous cars could be the driving factor in attracting consumers to the 5G technology. But the pace at which these developments come into the market is much slower due to the rigorous testing conditions for making it perfect.

Apple continues to face downward pressure on gross margins due to the highly competitive global markets characterized by aggressive price competition. The company has been struggling with the frequent introductions and transitions of products and services due to additional investments to remain competitive and stimulate customer demand.

Historically, the company has experienced higher net sales in the first quarter compared to other quarters in its fiscal years due in part to seasonal holiday demand. The company’s results, financial conditions, and growth will continue to be materially impacted by global and regional economic conditions as its sales outside the US represent a majority of its total net sales.

The company continues to face stiff competition from those selling mobile devices and personal computers that are based on other operating systems. The competitors seek to compete primarily through aggressive pricing and very low-cost structures. However, the company continues to invest heavily in R&D and marketing for the sales of its products.

Read: Will 5G technology replace 4G LTE

Analysts expect the company’s earnings to jump by 8.60% to $4.54 per share and revenue will rise by 5% to $88.39 billion for the first quarter. The company has surprised investors by beating analysts’ expectations in all of the past four quarters. The majority of the analysts recommended a “buy” rating with an average price target of $290.15.

For the fourth quarter, Apple reported a 3% decline in earnings due to higher costs and expenses while EPS rose by 4% on lower weighted average shares outstanding. Net sales rose by 2% as the company witnessed weakness in iPhone and Mac. For the first quarter, the iPhone maker expects revenue in the range of $85.5-89.5 billion and a gross margin of 37.5-38.5%. Operating expenses are anticipated to be $9.6-9.8 billion for the first quarter.

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