The consensus seems to be that sales of the new device will be very strong, although a “super cycle” could take more than a quarter to play out.
Many analysts believe the iPhone 12 sales could deliver December’s record quarterly results, with Apple’s quarterly sales rising above $ 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. “We believe the iPhone 12 has been 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 sales of $ 103.3 billion, a jump of 12.5% income from the same period in the previous year, according to Refinitiv.
Analysts’ consensus estimate iPhone sales will be $ 59.8 billion, up nearly 6.9% year-over-year, but that’s a lower growth rate than iPhone sales recorded in the same period a year earlier. (Some individual analysts have pegged iPhone sales higher for the December quarter.)
Apple (AAPL) Executives said last quarter they expected percentage growth in iPhone sales over the three months ended Dec. 31.
“Based on our Asian supply chain audits, we believe the iPhone 12 supercycle hype has become a reality,” Wedbush analyst Dan Ives said in an investor note last week.
The earnings report is also because Apple’s stock has continued to rise in recent weeks. Its shares are up nearly 85% over the past year and its market cap hit a record high of more than $ 2.4 trillion this week.
Why so much pressure on the iPhone 12?
Expectations for the iPhone 12 are high as it is the first Apple device to be able to connect to 5G, the high-speed wireless networks expected to open new opportunities for consumers and businesses.
The past several iPhone releases “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 that 5G connectivity could be a big change to encourage hundreds of millions of Apple users to upgrade. The fast download speeds and low lag time that 5G enables can make for a better experience with Apple services such as Apple Arcade.
However, there are big questions surrounding the iPhone 12 launch: will people really make money for an upgrade during the economic recession triggered by the pandemic? And with 5G networks still in its infancy, would consumers experience enough of a difference to even want it?
DA Davidson analyst Tom Forte said in a note last week that he thinks Apple’s lineup of 5G smartphones is “better positioned than investors fully appreciate,” in part because of carrier promotions.
There may also have been a jump in iPhone sales in the December quarter, not because of 5G, but because consumers haven’t upgraded in a few years and want other benefits like the iPhone 12’s impressive array of camera features, Ellegard said.
For the consumers who upgraded during the fourth quarter, multiple analysts say they expect more sales from the higher end versions of the iPhone 12, the Pro and the Pro Max, a potential boost to the company’s gross margins.
“A lot has to do with working from home,” said Ellegard. “People spend more time on their phones, playing games, video calls, and even just typing emails. Upgrading to the Pro or Pro Max to have that larger screen size … I think people will spend their money there.”
What else are analysts looking at?
The iPhone wasn’t the only major Apple product to hit the market in recent months. The company also released 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 Mac lineup powered by proprietary chips.
But analysts are likely to pay special attention to how Apple’s services segment performed. While iPhones remain the company’s main source of income, it is increasingly working towards becoming more of a services company.
Apple’s fitness plan, Fitness +, launched during the quarter. And the ongoing pandemic and persistent stay-at-home orders may have fueled subscription growth on Apple TV +.
The continued growth in Apple’s stock likely has a lot to do with the services sector, Gradient’s Ellegard said.
“People are changing the way they value the company,” he said. “It’s easier to predict future sales if you have recurring subscriptions, and it’s also a higher margin business. It’s a better business model, to be honest.”
Apple executives could also provide insight into what they think about the potential impact of the new administration on their business during Wednesday’s earnings call. While early Biden moves, such as the lifting of Trump’s travel ban, were likely 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 to Apple, from the changing of the guard to President Biden from President Trump,” DA Davidson’s Forte said in a note, adding that it could also be Apple. harm. if Biden continues Trump’s tariff war with China. “We are seeking feedback from management on those risks.”
