Apple earnings expectations are 'high' even though it has underperformed

Core Viewpoint - The upcoming earnings report for Apple is anticipated with cautious optimism, as the stock has underperformed recently, but expectations for iPhone growth remain high at nearly 14% [2] Financial Performance - Apple's stock has underperformed year-to-date and last year, but consensus expectations for iPhone growth are reasonably high [2] - The guidance for the second half of the year is a concern, particularly regarding rising component costs, which may affect margins [3] - Strong unit sales are expected, driven primarily by Pro and Pro Max models, leading to higher average selling prices (ASPs) [5][6] Product Insights - The new iPhone Air is not expected to be a significant driver for the quarter, with strong sales anticipated from Pro models instead [5][6] - There are concerns about the potential need for a price increase on the iPhone due to rising component costs, which could impact demand [3] AI and Technology Integration - Key questions revolve around how Apple will monetize AI and integrate it with existing technologies, particularly Siri [7][9] - There is skepticism about consumer interest in paying for AI features, but deeper integration could enhance the indispensability of Apple's technology [13] - The ability to drive a hardware upgrade cycle through AI integration is a critical focus for the company [10][12] Market Expectations - Current growth expectations for iPhone sales are considered lofty for a mature business, and a reduction in these expectations or a lower valuation could change market sentiment [15] - Apple's current trading valuation is approximately 22 times EBITDA, which is higher than historical averages, indicating a need for lower expectations or pricing to attract investment [15][16]