$Apple(AAPL)$ is scheduled to report its 2Q fiscal 2025 earnings on Thursday, May 1 after market close. Apple's 2Q revenue expected to rise 4% to $94.1 billion, following a 4% decline a year earlier. EPS could be up 6% to $1.61, reflecting the company's ability to maintain profitability even in a challenging market environment.
Although Apple is expected to show modest growth in its 2Q earnings, supply-chain will likely remain the most discussed topic on earnings call. Let’s dive into the potential sscenarios and related options strategies with Apple stock.
Apple Takes Top Spot for First-Quarter Smartphone Sales
iPhone sales, which accounted for 56% of the company's revenue in Q1 FY25, will be closely scrutinised. Apple took the top spot for global smartphone sales in the first quarter on the back of the iPhone 16e's launch and strong demand in countries such as Japan and India, data from Counterpoint Research showed. Apple had 19% of the smartphone market, despite flat or declining sales in the U.S., Europe and China.
Global smartphone shipments rose 1.5% in the first quarter, according to the International Data Corporation, which tracks mobile phone shipments, with Apple rushing to stockpile units to avoid tariffs imposed by U.S. president Donald Trump. Apple had chartered cargo flights to ferry 600 tons of iPhones, or as many as 1.5 million, to the United States from India in an effort to beat the tariffs.
The tariffs were heralded very early in Apple's second quarter, but were not implemented until April, after the quarter ended. The tariffs won't impact the results of the quarter itself, but will almost certainly play a factor in Q3 and future quarter discussions.
Morgan Stanley's analysts posited that the continued postponement of Siri improvements will temper iPhone upgrade rates. At the time, analysts reduced the firm's iPhone shipment forecast for the year to 230 million units, equating flat shipments year-on-year, but rising to 243 million in 2026. The slower-than-expected iPhone replacement cycle also cut down Morgan Stanley's full-year revenue estimate to $436 billion.
Option Strategy: Bull Call Spread
Strategy: Buy a lower-strike call (e.g., $205 strike) and sell a higher-strike call (e.g., $210 strike) expiring shortly after earnings (May 2, 2025).
Current Stock Price: $204.6 (as of 2025-04-24).
Key Strikes:
Long Call: $205 strike (mid-price: $6.2, Delta: 0.51).
Short Call: $210 strike (mid-price: $3.87, Delta: 0.382).
Max Profit: $317
Breakeven: $206.83
Rationale:
Targets a moderate post-earnings rally toward resistance at $230.81.
Capitalizes on AAPL’s recent upward momentum (+2.43% intraday, nearing 52-week high of $260.10).
Limits downside risk compared to buying a naked call.
Apple Supply-Chain Likely to Dominate the call
Apple's sourcing strategy will likely remain the most discussed topic on its 2Q earnings call given the company's high dependency on China for both assembly and components. While smartphones have been exempted from the bulk of China-related tariffs, the risk of those surcharges returning remains, putting focus on Apple's ability to assemble products outside of China. In terms of sales, Apple may report better-than-expected results across most of its products given the pull-forward in demand from consumers amid higher tariff fears.
However, Apple's demand is likely to weaken in 3Q with iPhone sales declining compared with a year ago due to weak consumer spending, lack of any new hardware upgrade and the recent pull-forward in demand.
Management's guidance on navigating US-China trade tensions will be essential. Investors will look for clarity on whether Apple plans to absorb tariff costs, renegotiate with suppliers, adjust pricing, or further diversify its supply chain beyond China to locations like India and Vietnam. If Apple decides to adjust product pricing, a key question is whether these increases will be targeted specifically at US consumers or distributed across global customers.
From a geographic perspective, North American customers contributed 42% of Apple's revenue in the previous quarter. This heavy reliance on US clients makes the company particularly sensitive to US trade policies and domestic economic conditions.
Bear Put Spread (Bearish Bet)
Strategy: Buy a higher-strike put (e.g., $200 strike) and sell a lower-strike put (e.g., $195 strike) expiring May 2, 2025.
Key Strikes:
Long Put: $200 strike
Short Put: $195 strike
Max Profit: $369
Breakeven: $198.69
Rationale:
Hedges against a drop toward support at $189.91.
Benefits from elevated implied volatility (IV ~50-60% for puts), which typically spikes before earnings.
Lower cost than a naked put, with capped risk.
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