Could Apple’s Shares Drop 20%?

By Douglas A. McIntyre Published Oct 25, 8:22AM EDT

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

The earnings season has been one of rallies or destruction, based on expected results and real earnings. Apple (NASDAQ: AAPL) is next on deck to releases numbers, at least among the tech giants. And earnings miss will punish its shares. Very bad numbers could drive the stock down 20%, which is a drop similar to the one it suffered early this summer.

Analysts’ estimates for the quarter are close to spectacular. EPS is expect to rise from to $1.88 from $1.42, year over year. Among the highest estimates is an expectation of $2.02. The market expects Apple to “beat” its numbers which puts expectations close to $2. Apple’s revenue is expected to rise from $42.2 billion to $51 billion. High estimates are close to $53 billion.

The Apple earnings this quarter will be based on two numbers. The first is sales of its flagship product, the iPhone. The second is China sales. Apple management has said already that Apple needs to have impressive Chinese sales to move overall revenue forward. In the July quarter (the one released just prior to the current release), Apple revenue in China rose 112% to $13.2 billion, and was 27% of the quarter’s total

The expectations come with anxieties. The first of these is whether the iPhone 6 line is already “dated” because of expectations of the release of the iPhone 7. The other is that China’s slowing economy will undermine all smartphone sales in the country. If so, Apple would need a very large increase in market share to keep its sales moving higher in the triple digits based on percentage improvement

Apple has been, for quarters, the barometer of tech as it related to the consumer. Many of the best tech earnings this last quarter have been due to advances or lack thereof in cloud computing. This was certainly true with Microsoft (NASDAQ: MSFT), IBM (NYSE: IBM), and Amazon (NASDAQ: AMZN). Expectations about Apple are not based on the cloud. Without strength in China and iPhone sales, it does not have that business to fall back on

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.