Equities Update: Apple, IAG…

Apple’s Q2 earnings beat expectations but face challenges in China

Josh Gilbert, Market Analyst at eToro, said: Apple’s earnings were good, but certainly not magnificent. The tech giant beat on earnings and revenue, but sales in China continued to struggle. Revenue came in at USD$85.78 billion for the quarter, above the USD$84.43 billion Wall Street expected.

“Apple did its best to assert its push into AI in a bid to excite investors, with Apple Intelligence being mentioned heavily. The feature, still in the early stages of being rolled out, is what Apple views as the key to its next upgrade cycle, which will lift sales and drive revenue growth.

“Double-digit growth in its services segment was a highlight, helping to offset the weakness in China, where sales fell by 6.5%. However, Apple did offer a positive outlook on sales and demand in China, which will be critical when the iPhone 16 is launched. Given how important the region is to Apple, strong sales would be a massive boost for the stock.

“Although Apple was a little late to the AI party, they are certainly delivering now. The next upgrade cycle will be viewed as AI-driven, so strong iPhone sales will be the key indicator for investors looking to get a clearer picture of how Apple is monetising AI. The worst looks to be in the rearview for Apple, and the next year looks exciting, with a clear runway for growth.”

IAG faring better than peers as dividend returns

Mark Crouch, Market Analyst at eToro, says: “British Airways owner IAG has maintained a steady flight path in 2024 with the international carrier faring considerably better than its national counterparts. Long haul travel has held up well with robust demand for air travel fuelling increased free cash flow, boosting shareholder returns as a result.

“While profits were down a touch from last year, the company’s balance sheet is in a far healthier state. Investors would need to go back to before the pandemic for the last time IAG paid a dividend, so today’s announcement of an interim dividend is a strong statement that the business has at last broken free of the pandemic fallout.

“Offering long and short haul flights has been a major strength to IAGs earnings power. However, as is usually the case with airlines, potential storm clouds are never far away. Air traffic controller strikes have been a constant headwind, while an economic slowdown has the potential to halt air travel demand in its tracks. A bigger concern perhaps are the rising tensions in the Middle East: should the conflict escalate further, a potential spike in oil prices is all but guaranteed, sending fuel costs soaring.”