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Key points to remember
- Analysts estimate adjusted EPS at $ 1.37 compared to $ 1.25 for Q1 2020.
- Service revenues are expected to grow faster.
- Income is expected to grow at the fastest rate in more than two years amid a global pandemic.
Apple Inc. (AAPL) has seemed oblivious to bad news over the past year. The company’s inventory has more than doubled from its low in early 2020 as demand for Apple products and services increased with more people working from home amid the COVID-19 pandemic. The title has even risen in recent months despite a major antitrust lawsuit filed by the US Department of Justice against Alphabet Inc. (GOOGL) that directly threatens Apple’s lucrative partnership with its tech giant colleague.
Investors will be watching closely whether Apple can maintain its performance when it releases its results on January 27, 2021 for the first quarter of fiscal 2021.Analysts predict that Apple will report increases in both adjusted earnings per share (EPS) and revenue, with adjusted EPS increasing at a slower pace than the first quarter of fiscal 2020 and revenue at a slightly faster pace. fast.Apple’s last fiscal year ended in September 2020.
Investors will also look at another key metric, Apple’s service revenue, which is a key part of Apple’s strategy to diversify its revenue mix. Analysts expect services revenue, which features rich profit margins, to post its strongest growth in five quarters.
Apple’s strong service revenue performance contributed to the stock’s success relative to the broader market, although the stock fell sharply in March and moved largely aside between early September and December. Over the past 12 months, however, Apple stocks have provided a 76.6% total return, about 5 times the 15.7% total return of the S&P 500 over the same period. All figures are as of January 24, 2021.
Source: TradingView.
Apple’s revenue has grown year over year (year over year) for 14 of the last 16 quarters, with the first and second quarters of fiscal 2019 being the only periods with a year-over-year decline. Still, earnings gains for many recent quarters have been anemic: earnings have grown less than 2% year-over-year in 4 of the most recent 6 quarters. For the first quarter of fiscal 2021, analysts expect that to change. They see a strong year-over-year increase of 11.1%, the biggest quarterly improvement in revenue since the fourth quarter of fiscal 2018.
The company’s adjusted earnings have also been mixed in recent quarters. After three quarters with annual gains of over 30% in fiscal 2018, Apple’s adjusted EPS growth has been uneven over the past 8 quarters. Three of those 8 quarters saw year-over-year declines, including the fourth quarter of fiscal 2020. For the first quarter of fiscal 2021, analysts estimate adjusted EPS growth of 9.9%. That’s a significant improvement on a sequential basis, but a much slower pace than the 19.3% increase in the same quarter a year earlier.
| Apple key indicators | |||
|---|---|---|---|
| Q1 FY 2021 (estimate) | Q1 FY 2020 | Q1 2019 | |
| Adjusted earnings per share ($) | 1.37 | 1.25 | 1.05 |
| Revenue (in billions of dollars) | 102.0 | 91.8 | 84.3 |
| Service revenues (in billions of dollars) | 14.9 | 12.7 | 10.9 |
Source: Visible Alpha
As mentioned, investors may focus this quarter on Apple’s service revenue. The company shifted towards services as sales of hardware peripherals, including the flagship iPhone, slowed.Apple’s services include streaming services such as movie and TV entertainment provider Apple TV +, video game vendor Apple Arcade, news services, and digital content stores including iTunes. Store and the App Store, as well as Apple Pay, and AppleCare. It also includes a variety other services that support Apple hardware devices. Apple’s service business revenues tend to be more stable and predictable than its product revenues, and services also have significantly higher margins.
Analysts expect Apple’s service revenue to hit $ 14.9 billion in the first quarter of fiscal 2021, its highest level in at least four years. The company’s service revenue has grown significantly in recent years, ranging from a low quarterly growth rate of 12.6% to a peak of 40.0% between fiscal 2018 and 2020. Service sales now account for more than 22% of Apple’s total fourth quarter revenue. For fiscal 2020. For the first quarter of fiscal 2021, analysts estimate that revenue will increase 17.3% year-over-year and 15.6% for the full year 2021.
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