Even a pandemic can’t stop Apple Inc. to break new records.
The smartphone giant is expected to record its first quarter with revenue of over $ 100 billion on Wednesday, driven by strong early performance for its new iPhone 12 line, as well as continued demand for Macs and iPads for distance work and school needs.
Apple AAPL,
fiscal results in the first quarter will be the first to include sales in the iPhone 12 family of devices, which began launching in October. Although Apple has faced supply constraints for some models, the debut of Apple’s first 5G compatible phones was undoubtedly the company’s most successful product launch in five years, according to Morgan Stanley analyst Katy Huberty.
Customers seem to be increasingly opting for higher-priced iPhone models and more expensive storage configurations, which would increase the average selling price of devices and help the company’s profit margin. Apple no longer offers unit sales metrics that shed light on its average selling prices, but the company usually offers some qualitative feedback on the best-performing devices.
Apple has also seen strong sales of Macs and iPads amid the pandemic, with more people working and studying from home, and this momentum is expected to continue through the first fiscal quarter. The company launched new iPads late last year, as well as its first computers that have the company’s own custom chip.
Analysts expect record performance for the company’s service category as well, although one area may not hold up as well. Apple has done a good job of transitioning sales to its online store, given the COVID-19 crisis, but “relying excessively on in-store purchases” to drive sales of its AppleCare insurance product, Huberty wrote.
What to expect
Earnings: Analysts tracked by FactSet expect Apple to earn $ 1.41 a share in the December quarter, up from $ 1.25 a year earlier. In the estimate, which crowd sources estimate from hedge funds, academics and others, the average projection requires $ 1.45 per share.
Income: The FactSet consensus shapes a record $ 102.54 billion in revenue for Apple’s first fiscal quarter, up from $ 91.82 billion a year earlier. The estimated consensus is $ 103.76 billion.
Analysts tracked FactSet’s iPhone revenue of $ 59.58 billion for Apple, up from $ 55.96 billion a year earlier. Apple declined to provide official guidance for the quarterly quarter on the latest earnings call, but chief financial officer Luca Maestri said at the time that he expects iPhone revenue to increase, although the devices will begin delivering later that quarter than they did. did it a year before.
The FactSet consensus calls for $ 7.38 billion in Pad revenue, up from $ 5.98 billion; $ 8.63 billion in revenue for the Mac, up from $ 7.16 billion; Revenues from services of $ 15.17 billion, up from $ 12.72 billion; and revenue of $ 11.49 billion for wearables, home and accessories, up $ 10.01 billion.
Stock movement: Apple shares have gained three of the last five earnings reports, and shares have risen 72% in the last year, as DJIA Dow Jones Industrial Media,
which considers Apple as a component, gained 7%.
Of the 41 analysts tracked by FactSet that cover Apple shares, 28 have a buy rating, 10 have a hold rating and three have a sell rating, with an average target price of $ 132.71.
What else to watch
Apple has declined to provide a quantitative financial forecast for each of its last three earnings reports due to uncertainty over the COVID-19 pandemic, and the trend is likely to continue this quarter.
“Given the persistent uncertainty, we expect Apple to provide ‘guidance’ rather than ‘guidance’ for Q2,” Bernstein analyst Toni Sacconaghi wrote in a note to customers. In addition to the many unknowns surrounding the pandemic, Apple’s late release of the latest batch of iPhones means that the March quarter could be stronger than usual, as there were fewer “sales days” for the iPhone 12 before This one.
Sacconaghi will also follow up on comments about Apple’s ongoing dispute with app developers led by Epic Games, which has sued Apple and claimed that the App Store’s rules regarding in-app purchases are monopolistic. Apple has reduced commission rates for smaller developers, which account for most of those on the App Store, even though these developers don’t contribute much to Apple’s overall revenue on the platform.
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“We believe Apple’s decision to reduce commissions has been polite, allowing the company to present itself as a small business promoter, while addressing the superficial complaint that its high app store fees stifle competition and innovation,” wrote Sacconaghi, a performance market price and target price of 120 USD per stock. “It remains to be seen whether Apple will provide additional comments on this issue; That being said, we continue to believe that the legal risk for App Store revenue is low. ”
Huberty, by Morgan Stanley, is interested in the company’s momentum in China. She suspects the company is weak at Huawei, citing data that suggests 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 per share.
Goldman Sachs analyst Rod Hall echoed Huawei’s challenges, though worried that “Apple has already started downsizing iPhone orders” and that construction orders for the first half of 2021 suggest a move toward selling-price models smaller averages.
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“These changes are consistent, in our opinion, with a normal iPhone redesign cycle, but they are not consistent with a supercycle,” he wrote. “Therefore, we continue to expect iPhone replacement rates to resume a steady decline in 2021.” Hall has a sales rating and a target price of $ 85 for Apple shares.
Analyst Monness, Crespi, Hardt & Co. Brian White highlights several new products and services that Apple could show during the quarterly call. In the December quarter, the company began selling its AirPods Max over-the-ear headphones and launched both a subscription fitness offer and a way to group the service together for a discount.
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“In our opinion, Apple’s portfolio has been positioned better than ever in the last holiday season, while product and service updates position Apple Planet well in 2021,” he wrote. White has a purchase rating and a target price of $ 144 for Apple shares.