The consensus seems to be that sales of the new device will be very strong, although a “supercycle” may take more than a quarter to materialize.
Many analysts believe iPhone 12 sales could deliver record results for the December quarter, with Apple’s quarterly revenue surpassing $ 100 billion for the first time.
“All signs point to a strong launch quarter for the iPhone 12,” Morgan Stanley analysts wrote in a note to investors last week. “In our opinion, the iPhone 12 was Apple’s most successful product launch in the past five years.”
Wall Street expects Apple to post earnings of $ 1.41 per share on total quarterly revenue of $ 103.3 billion, a jump of 12.5% income from the same period of the previous year, according to Refinitiv.
The consensus analyst estimate is that iPhone sales will reach $ 59.8 billion, an increase of nearly 6.9% year-over-year – but that’s a growth rate of less than that of iPhone sales recorded during the same period a year earlier. (Some individual analysts have higher iPhone sales for the December quarter.)
Apple (AAPL) Executives last quarter said they expected single-digit percentage growth in iPhone sales in the three months ending Dec.31.
“Based on our supply chain checks in Asia, we firmly believe the iPhone 12 supercycle hype has become a reality,” Wedbush analyst Dan Ives said in a note to investors last week. .
The earnings report also comes as Apple stock has continued to soar in recent weeks. Its shares have risen nearly 85% in the past year and its market cap this week has hit an all-time high above $ 2.4 trillion.
Why so much pressure on the iPhone 12?
Hopes are high for the iPhone 12 as it is the first Apple device capable of connecting to 5G, the ultra-fast wireless networks believed to create new capabilities for consumers and businesses.
The latest versions of the iPhone “haven’t really given users a reason to upgrade,” said Tyler Ellegard, investment analyst at Gradient Investments. This has led to disappointing iPhone sales figures in recent years.
With the iPhone 12, experts have said 5G connectivity could be a big enough change to encourage hundreds of millions of Apple users to upgrade. The fast download speeds and low latency enabled by 5G could improve the experience using Apple services such as Apple Arcade.
However, the launch of the iPhone 12 poses some big questions: will people really shell out for an upgrade during the economic recession caused by the pandemic? And with 5G networks still in their infancy, would consumers have enough of a difference to even want it?
DA Davidson analyst Tom Forte said in a note last week that he believes Apple’s 5G smartphone line-up is “better positioned than investors fully appreciate”, in part because of operator promotions.
It could also be that iPhone sales increased in the December quarter not because of 5G, but because consumers haven’t upgraded in a few years and want other perks like l The iPhone 12’s impressive array of camera features, Ellegard said.
For consumers who upgraded in the fourth quarter, several analysts say they expect more sales of the high-end versions of the iPhone 12, Pro and Pro Max, a potential increase in gross margins. of the company.
“It has a lot to do with working from home,” Ellegard said. “People are spending more time on their phones, playing games, making video calls, or even just typing their emails. Switching to the Pro or Pro Max version to have a bigger screen size … I think this is where people will be spending their money.
What else will analysts be looking at?
The iPhone wasn’t the only big Apple product to go on sale in recent months. The company also launched the eighth-generation iPad and a redesigned iPad Air, the Apple Watch Series 6 with new watch faces and health monitoring features and a new line of Macs powered by in-house designed chips. .
But analysts will likely pay close attention to the performance of Apple’s service segment. Although iPhones remain the main revenue driver for the company, it increasingly strives to become a service business.
Apple’s fitness subscription offering, Fitness +, was launched during the quarter. And the ongoing pandemic and the pursuit of home orders may have spurred the growth of subscriptions for Apple TV +.
The continued growth in Apple stocks likely has a lot to do with the service business, Gradient’s Ellegard said.
“People are changing the way they value business,” he said. “It’s easier to predict future sales when you have recurring subscriptions, and it’s a higher margin business as well. It’s a better business model, to be honest.”
Apple executives could also give a glimpse of their thoughts on the potential impact of the new administration on their business during Wednesday’s earnings call. While Biden’s early steps such as rescinding Trump’s travel ban have likely been welcomed by Silicon Valley, Big Tech continues to face major challenges in Washington DC.
“We see the potential of a return to a higher corporate tax rate as the biggest risk for Apple, from the change of guard from President Trump to President Biden,” DA Davidson’s Forte said in a note, adding that it could also hurt Apple. if Biden continues Trump’s tariff war with China. “We are seeking comments from management on these risks.”
