Even a pandemic can affect Apple Inc. did not hold back from hitting new records.
The smartphone giant is expected to post its first-ever quarter on Wednesday with more than $ 100 billion in revenue, driven by strong early performance for its new iPhone 12 line and continued demand for Macs and iPads for home work and school needs.
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The fiscal first quarter results will be the first to include sales of the iPhone 12 family of devices that launched in October. While Apple faced delivery constraints on some models, the debut of Apple’s first 5G-compatible phones may be the company’s most successful product launch in five years, according to Morgan Stanley analyst Katy Huberty.
Increasingly, customers seem to be opting for higher-end iPhone models and more expensive storage configurations, which would increase the average retail price of devices and help the company’s bottom line. Apple no longer provides unit sales statistics that shed light on average sales prices, but the company usually provides some qualitative comments on which devices perform best.
Apple has also seen strong sales of Macs and iPads during the pandemic, with more people working and studying from home, and that momentum is expected to continue into the fiscal first quarter. The company launched new iPads late last year, as well as the first computers with the company’s own custom chip.
Analysts also expect record performance for the company’s services category, although an area may not hold up that well. Apple has done a good job of shifting sales to its online store given the COVID-19 crisis, but it is “too dependent on in-store customer purchases” to drive sales of its AppleCare insurance product, Huberty wrote .
What to Expect
Merits: Analysts tracked by FactSet expect Apple to earn $ 1.41 per share in the December quarter, compared to $ 1.25 a year earlier. On Estimize, which crowdsource estimates from hedge funds, academics and others, the average projection asks $ 1.45 per share.
Revenue: The FactSet consensus models record revenue of $ 102.54 billion for Apple’s fiscal first quarter, up from $ 91.82 billion a year earlier. Estimize’s consensus stands at $ 103.76 billion.
Analysts tracked $ 59.58 billion in iPhone revenue for Apple through the FactSet model, up from $ 55.96 billion a year earlier. Apple declined to provide formal guidance for the quarter on its latest earnings call, but Chief Financial Officer Luca Maestri said at the time to expect iPhone revenue growth, even though devices were expected to ship later in the quarter than a year earlier.
FactSet consensus calls for $ 7.38 billion in Toad revenues, up from $ 5.98 billion; $ 8.63 billion in Mac revenues, compared to $ 7.16 billion; $ 15.17 billion in services revenue, compared to $ 12.72 billion; and $ 11.49 billion in revenues for the wearables, home and accessories category, up from $ 10.01 billion.
Stock movement: Apple shares are up after three of the past five earnings reports, and shares are up 72% in the past year as the Dow Jones Industrial Average DJIA,
which Apple counts as a component has won 7%.
Of the 41 analysts tracked by FactSet covering Apple’s stock, 28 have buy ratings, 10 hold ratings and three sell ratings, with an average price target of $ 132.71.
What else should you pay attention to
Apple has declined to provide a quantitative financial forecast in any of its last three earnings reports due to uncertainty surrounding the COVID-19 pandemic, and the trend is likely to continue this quarter.
“Given the ongoing uncertainty, we expect Apple to provide ‘guidelines’ rather than ‘guidelines’ for Q2,” Bernstein analyst Toni Sacconaghi wrote in a note to customers. In addition to the many unknowns surrounding the pandemic, Apple’s late launch of the latest line of iPhones means that the March quarter could be stronger than usual as there were fewer iPhone 12 “sales days” leading up to it.
Sacconaghi will also look forward to commentary on Apple’s ongoing dispute with app developers led by Epic Games, who sued Apple, claiming the company’s App Store rules around in-app purchases are monopolistic. Apple lowered commission rates for smaller developers, which make up the bulk of those in the App Store, even though these developers don’t contribute too much to Apple’s overall revenue from the platform.
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“We believe Apple’s decision to cut commissions was politically astute, allowing the company to position itself as a small business promoter, while at the same time superficially addressing the complaint that high app store rates are stifling competition and innovation,” wrote Sacconaghi, who has a market performance assessment and a price target of $ 120 on the stock. It remains to be seen whether Apple will comment further on this matter; That said, we continue to believe that the legal risk to App Store earnings is low. “
Morgan Stanley’s Huberty is interested in the company’s momentum in China. She suspects the company is taking advantage of the weakness at Huawei, citing data suggesting that customers are moving from Huawei to Apple devices at the fastest pace in 15 months. She is overweight and has a target price of $ 152 on the stock.
Goldman Sachs analyst Rod Hall reiterated the point about Huawei’s challenges, though he is concerned “that Apple has already started to reduce iPhone orders” and that build orders for the first half of 2021 point to a shift to models with lower average selling prices.
For more: Apple bear throws cold water on ‘supercycle’ story
“These changes are consistent with a normal iPhone redesign cycle in our opinion, but are inconsistent with a super cycle,” he wrote. “As a result, we continue to expect iPhone replacement rates to resume their continued decline in 2021.” Hall has a sales rating and a target price of $ 85 on Apple stock.
Brian White, an analyst for Monness, Crespi, Hardt & Co., highlights several new products and services that Apple could highlight during the quarterly call. In the December quarter, the company began selling its AirPods Max over-ear headphones, introducing both a fitness plan and a way to bundle service at a discount.
Read: Apple gets an ear for the AirPods Max’s $ 549 price tag
“In our opinion, Apple’s portfolio was positioned better than ever in the run-up to the past holiday season, while product and service updates positioned Planet Apple well in 2021,” he wrote. White has a buy rating and a target price of $ 144 on Apple stock.