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Expectations about Apple’s earnings keep rising.
Don Emmert / AFP via Getty Images
Apple
is heading towards its financial results for the December quarter with its stock at an all time high. Expectations on Wall Street have been rising steadily, with particularly high hopes for iPhone sales after the company launched initial sales of the iPhone 12 line in mid-quarter.
The Street also has high hopes for MacBook sales, driven by the launch of the first laptops with Apple-designed processors and the continued tailwind of the pandemic-induced work-from-home trend. Add to that the expectations of continued strong demand for iPads, wearable devices, and services, and you have the recipe for a strong quarter.
The only question is whether the expectations have gone too far.
Apple (ticker: AAPL) did not provide guidance for the quarter, adding an element of volatility to this report. The street consensus calls for revenue of $ 102.8 billion and earnings of $ 1.40 per share. For the seasonally milder March quarter, The Street sees $ 78.9 billion in revenue and profits of 90 cents per share.
According to street consensus estimates, as tracked by FactSet, iPhone revenue is expected to grow 6.4% to $ 59.6 billion, with double-digit growth in all other categories. The consensus has iPad sales at $ 7.4 billion, up 23.4%; Mac sales of $ 8.6 billion, up 20.4%; portable device sales of $ 11.5 billion, up 14.8%; and service revenues of $ 15.2 billion, up 19.3%.
Investors will also be keen to see if the company resumes providing earnings guidance.
Cowen analyst Krish Sankar repeated his outperformance rating on Apple on Friday, pushing his price target to $ 153 from $ 133. Sankar expects the company to beat expectations for the quarter, both on the top and bottom, thanks in part to strong iPhone demand. It projects $ 104.5 billion in revenue and profits of $ 1.46 per share. The analyst estimates that Apple sold 77 million iPhones in the quarter, up 97% sequentially and 7% year-over-year. It sees iPhone revenue of $ 60.1 billion, up 7% from a year ago, with service revenue up 26% to $ 16 billion. Apple remains Sankar’s first choice in the hardware industry.
Morgan Stanley analyst Katy Huberty reiterated her overweight rating on Apple stock last week, raising her price target to $ 152 from $ 144. She writes that her audits reveal that Apple saw the strength of its product and service portfolio in the quarter, thanks to the adoption of the iPhone 5G, the trend of work and home learning and to a sustained engagement with the App Store.
“We’re buyers ahead of what we expect to be a record December quarter impression,” Huberty wrote in a research note. “Our recent conversations suggest that investors expect Apple to report strong, but not great, results for the December quarter. We disagree and believe Apple is likely to post record quarterly revenue and profit. “
Huberty expects double-digit revenue growth across all revenue segments, with “upside biased risks” for iPhones, Macs and services. Its revenue estimate for the quarter is $ 108.2 billion, well above the consensus at $ 102.6 billion. She sees earnings for the December quarter of $ 1.50 a share, above the street at $ 1.40.
Huberty believes the iPhone 12 has been Apple’s most successful product launch in the past five years. It expects 78 million iPhones to ship in the quarter at an average selling price of $ 825, driving revenue growth of 14% to $ 63.9 billion, double the growth rate that the Street consensus predicts. currently for iPhone revenue.
Loop Capital analyst Ananda Baruah recently reiterated his buy rating, dropping his price target to $ 155 from $ 131. Baruah wrote in a research note that he expects a “very big year” for Apple and he thinks the signs should be clear with the next earnings report. Baruah believes street numbers could be meaningful both in the short term and throughout the 2021 calendar, thanks to the strength of iPhones and Macs. Baruah also believes the company could benefit from healthy growth in the iPad, AirPods, Watch, and Services.
Evercore ISI analyst Amit Daryanani recently reiterated his outperformance rating on Apple stocks while raising his share price target to $ 145 from $ 135. Daryanani pointed to a combination of better-than-expected unit demand and higher-than-expected average selling prices, as consumer demand tends towards the high-end Pro and Pro Max versions of the new phone line. He also noted “better service growth,” given over 30% growth in downloads from the App Store.
Apple shares closed Monday at a record $ 142.92. After rising 82% last year, the stock is up almost 8% so far in 2021.
Write to Eric J. Savitz at [email protected]
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