Should You Buy, Sell, or Hold Apple Stock Before Q2 Earnings?

Apple AAPL is set to report its second-quarter fiscal 2025 results on May 1.

Apple expects the March quarter’s (second-quarter fiscal 2025) revenues to grow low to mid-single digits on a year-over-year basis. For the Services segment, it expects a low double-digit growth rate.

The Zacks Consensus Estimate for fiscal second-quarter revenues is currently pegged at $93.56 billion, indicating growth of 3.09% year over year. 

The consensus mark for earnings is currently pegged at $1.60 per share, down by a penny over the past 30 days. The figure indicates a 4.58% increase from the year-ago quarter.

AAPL’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the earnings surprise being 4.39%, on average. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
 

Apple Inc. Price and EPS Surprise

Apple Inc. price-eps-surprise | Apple Inc. Quote

Let’s see how things are shaping up prior to this announcement.

Apple’s iPhone Sales Likely to Fall in Fiscal Q2

Apple’s fortunes are heavily reliant on the iPhone, which is by far its biggest revenue contributor. The device accounted for 55.6% of net sales in the first quarter of fiscal 2025, wherein sales decreased 0.8% year over year to $69.14 billion. 

iPhone sales are likely to have suffered from stiff competition in China from Chinese vendors, including Huawei and Xiaomi. A delay in the launch of Apple Intelligence to a major part of Apple’s installed base has been a concern.

The Zacks Consensus Estimate for fiscal second-quarter iPhone net sales is pegged at $45.674 billion, suggesting a 0.6% year-over-year decline.

AAPL’s Services Growth to Remain Steady in Fiscal Q2

Meanwhile, an expanding paid subscriber base has been a key catalyst for the Services business, which is riding on the increasing popularity of the App Store and an expanding installed base of devices. Apple has more than 1 billion paid subscribers across its Services portfolio, offering Apple TV+, Apple Arcade, Apple News+, Apple Card, Apple Fitness+, and Apple One bundle. 

The consensus mark for Services is currently pegged at $26.176 billion, suggesting 12% growth on a year-over-year basis.

Apple’s Mac Sales to Rise Y/Y

Apple’s strong Mac portfolio helped it gain market share in the first quarter of 2025. Per IDC, Apple had a market share of 8.7%, up 70 basis points (bps) on a year-over-year basis. Shipment grew 14.1% year over year to hit 5.5 million. According to Gartner, Mac shares inched up 20 bps while shipments increased 7% year over year. 

Apple’s shipment growth rate is the largest in IDC’s vendor list, followed by ASUS and Lenovo’s LNVGY growth of 11.7% and 4.8%, respectively. Dell Technologies DELL and HP HPQ saw a shipment growth of 3% and 6.1%, respectively. According to Gartner’s list, ASUS was placed at the #1 spot with shipment growth of 9.1%, trailed by Lenovo’s 9.6% growth and Apple’s 7% growth. Dell Technologies and HP saw growth of 2.1% and 5.9%, respectively.

The consensus mark for Mac revenue is currently pegged at $7.791 billion, suggesting 4.6% growth on a year-over-year basis.

AAPL Shares Underperform Sector

Apple shares have returned 16.4% year to date (YTD), underperforming the Zacks Computer & Technology sector’s return of 11.1%. However, Apple shares have outperformed Dell Technologies and HP YTD, with shares declining 17.6% and 22.5%, respectively.

Apple Stock’s Performance

Apple stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.

In terms of the forward 12-month Price/Earnings, AAPL is trading at 27.77X, higher than the Zacks Computer & Technology sector’s 23.41X.

Price/Earnings (F12M)

AI Focus Aids AAPL’s Prospects

Apple expanded availability of Apple Intelligence with iOS 18.4, iPadOS 18.4, and macOS Sequoia 15.4 updates in new languages, including French, German, Italian, Portuguese (Brazil), Spanish, Japanese, Korean, and Chinese (simplified) — as well as localized English for Singapore and India — and are accessible in nearly all regions around the world.

Apple iPhone and iPad users in the European Union can now access Apple Intelligence features. Apple Vision Pro now features Apple Intelligence in U.S. English.

Apple’s AI push is expected to bring consumer-focused AI-enabled PCs into the market, thereby aiding PC shipments in the long haulrun.

Apple’s – China Headwind Makes the Stock a Risky Bet

Apple’s near-term results are expected to bear the brunt of the weakness in China. The fiscal second-quarter results are expected to have suffered from a delay in the launch of Apple Intelligence. A stretched valuation is a concern.

Currently, Apple carries a Zacks Rank #3 (Hold), which implies that investors should wait for a favorable point to accumulate the stock. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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