Source: Zhitong Finance

A leader in the US consumer electronics sector$Apple (AAPL.US)$Financial reports for the second quarter of fiscal year 2024 (corresponding to the first calendar quarter of 2024) will be announced after the US stock market closes on May 2 (Thursday) EST. Wall Street analysts generally expect Apple's earnings per share for the second fiscal quarter to be 1.50 US dollars, with total revenue of about 90.1 billion US dollars. In comparison, earnings per share for the same period last year were $1.52, and total revenue was $94.84 billion. Due to the sharp decline in iPhone sales in the Chinese market, investors may be more concerned about the outlook and application plans of Apple executives, including Cook, on AI technology prospects and application plans during the performance conference call, and whether they can reveal more information about AI PCs and AI smartphones. Tesla CEO Musk has provided a good example. The management's ability to “paint the cake” is strong enough and the “cake drawn” is recognized, which can still boost investors' bullish confidence in stocks.

Since the beginning of this year, compared to$NVIDIA (NVDA.US)$,$Alphabet-A (GOOGL.US)$and$Microsoft (MSFT.US)$With the strong performance of US tech giants, Apple's stock price, which is also a tech giant, can be described as “showing a decline”. Compared with the 7% increase of the US stock benchmark index, the S&P 500 index, Apple's stock price fell by more than 11% during the same period, ranking as the most disappointing technology stock with Tesla since this year.

If you extend the timeline, looking back at the past six months, Apple's stock price fell within 1%, and there was no change. However, the S&P 500 index rose by 22% during the same period, which made Apple investors feel very depressed. However, the earnings per share, which investors are fond of, compared to expectations, the iPhone, iPad, and other consumer electronics manufacturers surpassed analysts' general earnings expectations for two consecutive quarters, with average earnings per share exceeding expectations by 4.67% in the previous two performance reports.

For investors who follow Apple's earnings report, the second fiscal quarter may be difficult to surprise. In particular, iPhone revenue, which accounts for the largest share of Apple's total revenue (accounting for nearly 60% of total revenue), may seem pessimistic. After all, iPhone sales declined sharply in the first quarter of the critical Chinese market, and shipments in the global market also declined in the first quarter, while Android rivals rose strongly.

According to the latest statistics from Counterpoint Research, a well-known independent research institute, consumer electronics giant Apple's iPhone series sales in the Chinese market fell as high as 19% year-on-year in the first quarter up to March. This is the worst performance of Apple iPhone in a single quarter in the Chinese market since the COVID-19 outbreak around 2020. The US tech giant's share in the fiercely competitive Chinese smartphone market fell to third place, roughly on par with its rapidly rising competitor Huawei in the Chinese market. Under the leadership of local Chinese brands such as Honor and Xiaomi, the entire Chinese smartphone market grew by about 1.5% year-on-year in the first quarter, achieving positive year-on-year growth for two consecutive quarters.

According to some analysts, one of the main reasons why the weak iPhone sales volume in the Chinese market is remarkable is that the first quarter is the time when China celebrates the Lunar New Year, and is traditionally the peak consumption period for Chinese consumers. In contrast, Huawei's sales increased by an astonishing 70%, highlighting its full rise in the high-end smartphone market once dominated by Apple.

China is still one of Apple's largest markets, but after Huawei launched a smartphone with a chip made with 100% Chinese technology, consumers in the Chinese market welcomed the launch of the new Huawei smartphone.

Huawei's growth is due in large part to the boom in sales of its 5G-enabled Mate 60 series, and its well-known brand awareness, which has greatly increased its share of the high-end market above $600. Furthermore, despite the impact of Huawei's strong return on other vendors in the market, Honor achieved 11.5% year-on-year growth in the first quarter thanks to its popular models (such as the X50 and Play 40) and the expansion of its offline channels.

Prior to Counterpoint's release of the latest data, global iPhone sales also showed a downward trend due to weak demand under the pressure of interest rates. According to IDC's latest statistics, in the first three months of 2024, global iPhone shipments fell by nearly 10%, which caused global investors to become pessimistic about the latest financial data released by Apple on May 2.

According to IDC statistics, iPhone shipments fell sharply by nearly 10% in the first quarter of this year, falling steadily at a time when the global smartphone industry as a whole showed a clear rebound. According to IDC data, shipments in the global mobile phone market increased to 289.4 million units, an increase of about 7.8% over the same period last year. Among them, Samsung Electronics (Samsung Electronics) regained the top spot. Brand Transsion (Transsion), which focuses on the budget, achieved a sharp 85% increase in shipments, and Xiaomi's first-quarter data also rebounded, completely narrowing the gap with Apple (Apple), which ranked second.

Compared to performance data, investors may pay more attention to Apple's “AI Vision”

However, looking ahead to the rest of the year, some Wall Street analysts believe there are still plenty of reasons to be optimistic about Apple's performance growth prospects, including the company's efforts to integrate artificial intelligence technology into applications such as iPhones. Therefore, compared to the performance data for the second fiscal quarter, investors may pay more attention to the ambitions of Apple executives, including Cook, about AI technology and whether they can reveal more information about AI PCs and AI smartphones during the performance conference call. After all, Tesla CEO Musk has provided a good example — that is, even though the company's actual performance is poor, the management's “drawing the cake” power is strong enough and the “cake drawn” is persuasive enough to still boost investors' bullish confidence in stocks.

According to media reports, the company's upcoming major iOS 18 update will include artificial intelligence features. These features will be processed entirely by the device's own AI with high efficiency and speed, rather than a time-consuming response process in the cloud. Some analysts speculate that the upcoming iPhone 16 will be equipped with a chip that can perform end-side AI inference, as well as artificial intelligence security and related privacy features, which is called a “game changer.”

According to information revealed by Bloomberg's Apple expert Mark Gurman, Apple is developing its own AI big language model to enhance the ChatGPT-like generative artificial intelligence features on the iPhone 16. In some cases, the comprehensive performance of Apple's artificial intelligence tools may not be as powerful and knowledgeable as generative AI tools such as ChatGPT, so some analysts say Apple can fill some technical gaps by cooperating with Google and other artificial intelligence providers, such as OpenAI. Apple's method of embedding the big AI model on the end side will greatly shorten the response time of the large model, and it will be easier for Apple to maintain privacy.”

These features are expected to be launched at an important time after Apple experienced a severe drop in global phone shipments. But this is not just an iPhone issue. On Thursday, Apple's service business division will also receive close attention from investors. The services business is likely to continue to maintain double-digit revenue growth in the second fiscal quarter and fiscal year 2024, which may help offset the weak macro trend affecting iPhone sales. Therefore, considering the company's growth in the service business, efforts to improve operating efficiency, and Apple's focus and determination on AI, Wall Street institutions such as Bank of America and Wedbush are still optimistic about Apple's stock price trend.

Dan Ives, an analyst at Wedbush, a top Wall Street investment agency, predicts that in terms of its artificial intelligence development opportunities, Apple's user base of more than 2 billion system installation users brings the “best” opportunity in the world. Ives believes that Apple's upcoming global WWDC in June will be a “critical moment” for the company's AI ambitions, and the analyst expects Apple to make the leap forward in AI smartphones with the iPhone 16 scheduled to launch in September this year.

“When it comes to artificial intelligence, they don't just look outside. This is one of the sites with the highest number of system installers in the world, and this is a critical moment for Apple to announce its artificial intelligence strategy.” Ives display. Wedbush reiterated Apple's target price of $250 (Apple closed at $169.30 by the close of US stocks on Friday) and the “outperforming market” rating.

Another major Wall Street bank, Morgan Stanley, recently predicted that Apple's WWDC in June of this year will be the focus of market attention, and the top priority is probably the new smartphone that Apple may launch with a big AI model.

Currently, leading smartphone hardware manufacturers are developing their own big models, and they are implanting large end models that can operate offline into the next generation of models to create so-called “AI big model smartphones.” Compared to the general-purpose AI model that uses cloud-based computing power, the large endside local model allows smartphone users to use similar products such as ChatGPT more efficiently, conveniently, and safely, and is expected to use end-side AI to achieve “personal AI assistants” that are more in line with individual needs.

According to market research firm Canalys, 5% of smartphone shipments will be AI phones by 2024, and this proportion is expected to rise to 45% by 2027. Canalys said that in the process of finding new growth opportunities in the smartphone industry, various manufacturers are prioritizing the introduction of generative AI as a strategy and are committed to personalized and experience-oriented innovation. Canalys emphasized that with the release of the new Galaxy S24 AI smartphone, Samsung's vision for the future also became clear: Generative Artificial Intelligence (GenAI) has become an essential element of its long-term product strategy, particularly in the high-end and flagship markets.