Even a pandemic could hurt Apple Inc. not stopping to set new records.
The smartphone giant is expected to post its first quarter on Wednesday with more than $ 100 billion in revenue, driven by strong early performance for its new iPhone 12 series, as well as the continuing demand for Macs and iPads for remote work and school needs.
Apple’s AAPL,
fiscal results in the first quarter will be the first to include sales of the iPhone 12 family of devices, which began rolling in October. Although Apple has had restrictions on supply on some models, the debut of Apple’s first 5G phones is probably the company’s most successful launch in five years, according to Morgan Stanley analyst Katy Huberty.
Customers are increasingly opting for iPhone models with higher price and more expensive storage configurations, which will increase the average selling price of devices and help the company’s profit margin. Apple no longer provides unit sales statistics that shed light on its average sales prices, but the company usually makes some qualitative comments about which devices perform best.
Apple also saw strong sales of Macs and iPads amid the pandemic, with more people working and studying at home, and the momentum is expected to continue in the fiscal first quarter. The company launched new iPads late last year, as well as its first computers featuring the company’s own custom chip.
Analysts also expect record performance for the company’s services category, though one area may not hold up as well. Apple has done a good job of transferring sales to its online store in the wake of the COVID-19 crisis, but it is “too dependent on in-store purchases” to boost sales of its AppleCare insurance product, writes Huberty.
What to expect
Earnings: Analysts followed by FactSet expect Apple to earn $ 1.41 per share in the December quarter, up from $ 1.25 a year earlier. At Estimize, which calculates the estimate of hedge funds, academics and others, the average projection is $ 1.45 per share.
Income: The FactSet consensus models a record $ 102.54 billion in revenue for Apple’s fiscal first quarter, up from $ 91.82 billion a year earlier. The estimated consensus is $ 103.76 billion.
According to the FactSet model, analysts are tracking $ 59.58 billion in iPhone revenue for Apple, up from $ 55.96 billion a year earlier. Apple did not want to give formal quarterly guidelines on the latest earnings call, but CFO Luca Maestri said at the time that the increase in iPhone revenue was expected, although devices would start shipping later in the quarter than they ‘ had done a year before.
The FactSet consensus calls for $ 7.38 billion in Road revenue, compared to $ 5.98 billion; $ 8.63 billion in Mac revenue, compared to $ 7.16 billion; $ 15.17 billion in service revenue, compared to $ 12.72 billion; and $ 11.49 billion in revenue for the category of portable, home and accessories, compared to $ 10.01 billion.
Stock movement: Apple shares have risen after three of the past five earnings reports, and the shares have risen 72% over the past year than the Dow Jones Industrial Average DJIA,
which Apple counts as a component increased by 7%.
Of the 41 analysts tracked by FactSet that cover Apple’s shares, 28 have buy ratings, 10 hold ratings and three sell ratings, with an average price target of $ 132.71.
What else to pay attention to
Apple has refused to make a quantitative financial forecast in each of its last three earnings reports due to uncertainty surrounding the COVID-19 pandemic, and the trend is likely to continue this quarter.
“Given long-term uncertainty, we expect Apple to be more likely to provide ‘guidelines’ instead of ‘guidance’ for Q2,” Bernstein analyst Toni Sacconaghi wrote in a note to customers. In addition to the many unknowns surrounding the pandemic, Apple’s latest launch period for the latest series of iPhones means that the March quarter may be stronger than usual, as fewer iPhone 12 sales days have led to it.
Sacconaghi will also look for comment on Apple’s ongoing dispute with app developers led by Epic Games, which has sued Apple, claiming the company’s App Store rules regarding in-app purchases are monopolistic. Apple has lowered commission rates for smaller developers that make up the bulk of those in the App Store, though these developers do not contribute too much to Apple’s overall revenue from the platform.
More about Apple and Epic: ‘Fortnite’ dispute could open locks for serious Apple investigation
“We believe that Apple’s decision to reduce commissions was politically sharp, which allowed the company to present itself as a promoter of small businesses, while complaining that the high app store fees hinder competition and innovation, superficially addressed, “writes Sacconaghi, which has a market performance rating and $ 120 price target on the stock. ‘It remains to be seen whether Apple will comment further on this issue; that said, we continue to believe that the legal risk to the App Store revenue is low. ”
Morgan Stanley’s Huberty is interested in the company’s China momentum. She suspects the company is taking advantage of weakness at Huawei, citing data that suggests customers are switching from Huawei to Apple devices at the highest rate in 15 months. She has an overweight rating and $ 152 price target on the stock.
Goldman Sachs analyst Rod Hall reflected the point on Huawei’s challenges, although he was concerned “that Apple has already started cutting iPhone orders” and that orders for the first half of 2021 suggest it is moving towards models with lower average sales prices.
For more: apple bears pour cold water over ‘superbike’ story
“In our opinion, these changes correspond to a normal redesign cycle for iPhone, but do not correspond to a superbike,” he wrote. “As a result, we continue to expect iPhone replacement rates to resume their continued decline in 2021.” Hall has a sell rating and $ 85 target price on Apple shares.
Monness, Crespi, Hardt & Co. analyst Brian White highlights several new products and services that Apple may shed light on during the quarterly call. During the December quarter, the company began selling its AirPods Max over-the-ear headphones and rolled out both an entry-level fitness offering and a way to bundle services for a discount.
Read: Apple is working on the $ 549 price of the AirPods Max
“In our opinion, Apple’s portfolio was better positioned than ever in the past holiday season, while updates to Planet’s products and services were good for Apple in 2021,” he wrote. White has a buy price and $ 144 price target on Apple shares.