After the market closed on Wednesday, Tesla (ticker: TSLA) posted third-quarter revenue of $21.5 billion, its highest ever, but still lower than the $22 billion Wall Street expected. The company said its results were hurt by the strong dollar, as well as factors such as higher costs for raw materials and logistics.
The historic strength of the dollar against a basket of currencies could be a problem for Apple (AAPL) as well.
The iPhone maker, which reports its earnings for its fiscal fourth quarter on Oct. 27, has forecast that unfavorable exchange rates could represent a six percentage-point drag on its sales growth for the period. But the damage could be worse, according to D.A. Davidson analyst Tom Forte, given that the U.S. Dollar Index (DXY) has gained considerably over the last six months, trading above the 100 mark for all of that time.
Apple got roughly 58% of its revenue from outside the Americas in fiscal 2021, while Tesla got about 55% of its revenue from abroad, according to filings by the companies.
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TECHNOLOGY | STREET NOTES
The Bad News for Apple in Tesla’s Earnings
By Karishma Vanjani
Updated Oct. 21, 2022 8:08 am ET / Original Oct. 20, 2022 11:50 am ET
Tesla got about 55% of its revenue from abroad in 2021.
MARK WILSON/GETTY IMAGES
Tesla ’s woes could be Apple ’s , too.
After the market closed on Wednesday, Tesla (ticker: TSLA) posted third-quarter revenue of $21.5 billion, its highest ever, but still lower than the $22 billion Wall Street expected. The company said its results were hurt by the strong dollar, as well as factors such as higher costs for raw materials and logistics.
The historic strength of the dollar against a basket of currencies could be a problem for Apple (AAPL) as well.
The iPhone maker, which reports its earnings for its fiscal fourth quarter on Oct. 27, has forecast that unfavorable exchange rates could represent a six percentage-point drag on its sales growth for the period. But the damage could be worse, according to D.A. Davidson analyst Tom Forte, given that the U.S. Dollar Index (DXY) has gained considerably over the last six months, trading above the 100 mark for all of that time.
Apple got roughly 58% of its revenue from outside the Americas in fiscal 2021, while Tesla got about 55% of its revenue from abroad, according to filings by the companies.
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Forte said in a research note Thursday that Apple’s sales, earnings, or both, could fall short of what Wall Street has penciled in because of a “bigger-than-expected headwind from the strong U.S. dollar.” Analysts expect Apple to report $1.27 per share in earnings from $88.7 billion in sales, according to FactSet.
The fact that sales in currencies other than the dollar are worth less in terms of greenbacks than they were at the start of the year is a challenge for lots of businesses. Some 30% of the total revenue of companies in the S&P 500 is earned abroad.
In a separate note, Forte also highlighted other tech companies, including Amazon.com (AMZN), Etsy (ETSY), and Pinterest (PINS), saying their earnings could also fall short of expectations.