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3 Things to Know before Apple’s Q1 Earnings Report

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Apple (NASDAQ:AAPL) will report its earnings for the first quarter of fiscal 2020 on Tuesday after the market close. Apple will be the second company in the FAANG group to release financial results for the quarter ending December 2019. Netflix (NASDAQ:NFLX) was the first company in the FAANG group to release its December quarter earnings on January 21. Facebook (NASDAQ:FB), Amazon, and Alphabet (NASDAQ:GOOGL) have their earnings coming up on Wednesday, Thursday, and February 3, respectively.

The performance of the iPhone business and management’s commentary on the Apple TV+ video service will likely catch investors’ intention when Apple’s earnings arrive.

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Apple’s first-quarter earnings expectations

Wall Street analysts expect Apple to report an EPS of $4.53 on revenue of $88.4 billion for the first quarter. The company’s internal forecast calls for first-quarter revenue of $85.5 billion–$89.5 billion. The company didn’t provide internal EPS guidance. In the first quarter of fiscal 2019, Apple reported an EPS of $4.18 on revenue of $84.3 billion. The EPS set an all-time high record and smashed the consensus estimate at $4.17. The revenue met the consensus estimate but fell short of the internal forecast of $89 billion–$93 billion.

$125 billion video streaming market

Households around the world are ditching traditional pay-TV subscriptions for online video streaming. The shift has created a huge revenue opportunity in the video streaming market. According to Grand View Research, the global video streaming market generated $36.6 billion in revenue in 2018. The market is on track to hit $124.5 billion by 2025. Apple has set its sights on this market.

In November, Apple launched a subscription video streaming service called “Apple TV+.” The service costs $4.99 a month, which makes it competitive in price compared to Disney+, which costs $6.99 a month. Disney+, a product of Walt Disney (NYSE:DIS), launched about two weeks after Apple TV+. Netflix, the market leader, starts at $8.99 a month. Notably, people’s favorite Netflix plan costs $12.99 a month.

The launch of Apple TV+ expands the company’s service business, which has become an important growth engine. When Apple reports its earnings on Tuesday, investors will be looking for management’s updates on the progress of Apple TV+

Apple’s iPhone business needs a boost

The revenue from Apple’s iPhone business has been falling in recent quarters, which indicates that the business needs a boost. Usually, Apple doesn’t discuss its product plans. However, there have been reports about the company launching a cheaper iPhone model in March before its big iPhone event in September. A cheaper iPhone should help the company cater to a broader market and boost smartphone sales.

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