Updated Jan. 26, 2014 3:07 p.m. ET
Apple Inc. AAPL -1.82% Apple Inc. U.S.: Nasdaq $546.07 -10.11 -1.82% Jan. 24, 2014 4:00 pm Volume (Delayed 15m) : 15.24M AFTER HOURS $547.23 +1.16 +0.21% Jan. 24, 2014 7:59 pm Volume (Delayed 15m): 245,864 P/E Ratio 13.68 Market Cap $487.40 Billion Dividend Yield 2.23% Rev. per Employee $2,127,850 01/26/14 AHEAD OF THE TAPE: Apple Needs... 01/26/14 Carl Icahn: A Student of Stupi... 01/25/14 Hon Hai Bets on E-Commerce, 4G More quote details and news » is hardly the first Western company to seek its fortune in China, though investors are putting the onus on it to produce a pot of gold.
China will figure much more prominently in Apple's results this year, starting with its first fiscal-quarter report Monday. China was included in the launch of the iPhone 5S and 5C in the fall, and Apple finally signed a deal with China Mobile Ltd. 0941.HK -0.92% China Mobile Ltd. Hong Kong $75.45 -0.70 -0.92% Jan. 27, 2014 10:12 am Volume : 7.91M P/E Ratio 9.49 Market Cap $1530.81 Billion Dividend Yield 4.54% Rev. per Employee $4,065,060 01/20/14 Samsung to Face More Headwinds 01/17/14 China Mobile iPhone Packages N... 01/15/14 Apple CEO Signals Company Plan... More quote details and news » The latter's impact should surface in the company's outlook for the current period.
Prospects for growth in China—along with buzz about future products—have helped push Apple's stock up more than 38% from a late-June trough. To justify this, Apple will need to return to year-over-year growth in earnings per share after four consecutive quarters of decline.
Analysts expect it to do so. They forecast Apple will report earnings of $14.09 a share for the quarter ended in December compared with $13.81 a year earlier. Revenue is seen expanding to $57.5 billion, up about 5.5%.
For that, Apple is depending on a warm reception for the new iPhones in China, where the device remains priced for the wealthy. The U.S. isn't expected to be a source of sales gains: Verizon Communications Inc. VZ -0.48% Verizon Communications Inc. U.S.: NYSE $47.63 -0.23 -0.48% Jan. 24, 2014 4:00 pm Volume (Delayed 15m) : 25.62M AFTER HOURS $47.40 -0.23 -0.48% Jan. 24, 2014 7:57 pm Volume (Delayed 15m): P/E Ratio 11.88 Market Cap $136.22 Billion Dividend Yield 4.45% Rev. per Employee $657,306 01/22/14 Netflix CEO on Net Neutrality:... 01/22/14 Verizon Says It Received Over ... 01/21/14 Intel to Sell Online-TV Unit t... More quote details and news » last week reported a 10% year-over-year drop in smartphone activations for the fourth quarter. That carrier has accounted for about 11% of total iPhone shipments on average over the last eight quarters.
Apple doesn't break out device sales by country, but analysts are looking for total iPhone shipments to rise to about 55 million units from 47.8 million in 2012's December-end quarter. Helping matters: Last fall's 5S and 5C launches included Japan's NTT DoCoMo. 9437.TO -3.11% NTT DoCoMo Inc. Japan: Tokyo ¥1651 -53 -3.11% Jan. 27, 2014 11:07 am Volume : 3.94M P/E Ratio 13.42 Market Cap ¥7437.96 Billion Dividend Yield 3.63% Rev. per Employee ¥186,763,000 01/20/14 What's News 01/16/14 NTT DoCoMo Deals Samsung a Set... 12/04/13 China Mobile and Apple Sign iP... More quote details and news »
Ironically, a risk for Apple is that strong results heighten already rising expectations for the rest of the year. Current forecasts call for double-digit revenue gains for the quarters ended in June and September.
That is no slam dunk given the lack of clarity around Apple's product plans and an already huge revenue base. Investors are counting on a larger-screen iPhone later this year, and maybe even a smartwatch. No information on those will be forthcoming in Monday's report, though.
Apple has been stung before by hopes that are too high. China may glitter in investors' eyes, but that doesn't mean it will always be golden.
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