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Even a pandemic cannot prevent Apple Inc. from reaching new records.
The smartphone giant is expected to release its very first quarter with more than $ 100 billion in revenue on Wednesday, thanks to strong preliminary performance for its new iPhone 12 lineup as well as continued demand from Macs and iPads for the remote work and school needs.
Apple AAPL,
First quarter tax results will be the first to include sales of the iPhone 12 family of devices, which began rolling out in October. Although Apple has faced supply constraints on some models, the launch of Apple’s first 5G-enabled phones was arguably the company’s most successful product launch in five years, the analyst says. by Morgan Stanley Katy Huberty.
Customers seem to be increasingly opting for more expensive iPhone models and more expensive storage setups, which would increase the average selling price of the devices and help the company’s profit margin. Apple no longer provides unit sales metrics that inform its average selling prices, but the company generally offers qualitative feedback on top performing devices.
Apple also saw strong Mac and iPad sales amid the pandemic, with more people working and studying from home, and that momentum is expected to continue into the first quarter of the fiscal year. The company launched new iPads late last year along with its first computers with its own custom chip.
Analysts also expect record performance for the enterprise services category, although one area may also not hold up. Apple has done a good job of transitioning sales to its online store given the COVID-19 crisis, but it “relies too much on in-store customer purchases” to drive sales of its AppleCare insurance product, a writes Huberty.
What to expect
Earnings: Analysts tracked by FactSet expect Apple to have earned $ 1.41 per share in the December quarter, down from $ 1.25 a year earlier. On Estimize, which relies on estimates from hedge funds, academics and others, the average projection calls for $ 1.45 per share.
Returned: The FactSet consensus models a record revenue of $ 102.54 billion for Apple’s fiscal first quarter, down from $ 91.82 billion a year earlier. The Estimize consensus is $ 103.76 billion.
Analysts followed the FactSet model of $ 59.58 billion in iPhone revenue for Apple, down from $ 55.96 billion a year earlier. Apple declined to give formal guidance for the quarter in the latest earnings call, but CFO Luca Maestri said at the time that he expected iPhone revenue growth even if the devices began. to be shipped later in the quarter compared to the previous year.
The FactSet Consensus calls for $ 7.38 billion in Pad revenue, up from $ 5.98 billion; Mac revenue $ 8.63 billion, compared to $ 7.16 billion; $ 15.17 billion in service revenues, compared to $ 12.72 billion; and $ 11.49 billion in revenues for the wearable devices, home and accessories category, up from $ 10.01 billion.
Movement of stock: Apple stocks have gained after three of the last five earnings reports, and stocks have risen 72% in the past year, the Dow Jones Industrial Average DJIA,
which counts Apple as a component, gained 7%.
Of the 41 analysts tracked by FactSet who cover Apple stock, 28 have buy ratings, 10 hold ratings and three sell ratings, with an average price target of $ 132.71.
What else to watch out for
Apple has declined to give quantitative financial forecasts in each of its last three earnings reports due to uncertainty over the COVID-19 pandemic, and the trend will likely continue this quarter.
“Given the continuing uncertainty, we expect Apple to be more likely to provide ‘guidance’ rather than ‘advice’ for the second quarter,” wrote analyst Bernstein Toni Sacconaghi in a note to clients. In addition to the many unknowns surrounding the pandemic, Apple’s late launch schedule for the latest batch of iPhones means the March quarter could be stronger than usual, as there were fewer “sales days” iPhone 12 predecessors.
Sacconaghi will also monitor comments on the ongoing dispute between Apple and app developers led by Epic Games, which has sued Apple and claimed the company’s App Store rules regarding in-app purchases are monopoly. Apple has cut commission rates for small developers who make up the bulk of the App Store, even though those developers don’t contribute too much to Apple’s overall revenue from the platform.
More info on Apple and Epic: ‘Fortnite’ dispute could open floodgates for further consideration of Apple
“We believe Apple’s decision to cut commissions was politically sound, allowing the company to market itself as a promoter of small businesses, while dealing superficially with the complaint that its high fees in the App Store. stifle competition and innovation, ”wrote Sacconaghi, who has a market performance rating and a target price of $ 120 on the stock. “It remains to be seen whether Apple will provide further comment on this matter; That said, we continue to believe that the legal risk to App Store revenue is low. “
Huberty of Morgan Stanley is interested in business dynamics in China. She suspects the company is capitalizing on Huawei’s weakness, citing data suggesting that customers are switching from Huawei devices to Apple devices at the highest rate in 15 months. It has an overweight rating and a target price of $ 152 on the stock.
Goldman Sachs analyst Rod Hall echoed this point on Huawei’s challenges, though he fears “Apple has already started cutting iPhone orders” and construction orders for the first half of 2021 suggest a shift towards models with lower average selling prices.
Read more: Apple Bear throws cold water on the history of the “ supercycle ”
“These changes are consistent, in our view, with a normal iPhone overhaul cycle but not consistent with a supercycle,” he writes. “As a result, we continue to expect iPhone replacement rates to resume their continued decline in 2021.” Hall has a sell rating and target price of $ 85 on Apple shares.
Brian White, analyst at Monness, Crespi, Hardt & Co., highlights several new products and services that Apple could shed light on in the quarterly call. During the December quarter, the company started selling its AirPods Max in-ear headphones and rolled out both a subscription-based fitness offering and a way to bundle the service at a discount.
Read: Apple is excited about AirPods Max’s $ 549 price tag
“In our opinion, Apple’s portfolio was better positioned than ever as we approach the recent holiday season, while product and service updates position Apple planet well in 2021,” he wrote. White has a buy rating and a target price of $ 144 on Apple shares.
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