The consensus seems to be that sales of the new device will be very strong, although a ‘superbike’ may take more than a quarter to play out.
Many analysts believe that iPhone 12 sales could achieve the results of the December quarter, with Apple’s quarterly revenue exceeding $ 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 has been Apple’s most successful product launch for the past five years.”
Wall Street expects Apple to earn $ 1.41 per share on total quarterly sales of $ 103.3 billion, up 12.5% according to Refinitiv income from the same period in the previous year.
Analysts’ consensus estimate is that iPhone sales will reach $ 59.8 billion, an increase of almost 6.9% year-on-year – but this is a lower growth rate than iPhone sales during the same period a year earlier . (Some individual analysts have higher iPhone sales for the December quarter.)
appeal (AAPL) executives said last quarter that they would expect single-digit growth in iPhone sales during the three months to Dec. 31.
“Based on our supply chain controls in Asia, we strongly believe that the iPhone 12 superbike hype has become a reality,” Wedbush analyst Dan Ives said in an investor letter last week.
The earnings report also comes because Apple’s shares have continued to rise over the past few weeks. Its shares have risen nearly 85% in the past year and its market capitalization reached a record high of more than $ 2.4 billion this week.
Why so much pressure on the iPhone 12?
Hope for the iPhone 12 is high, as it is the first Apple device to connect to 5G, the super-fast wireless networks that are expected to create new capabilities for consumers and businesses.
Gradient Investments investment analyst Tyler Ellegard said the past few iPhone versions “did not really give users a reason to upgrade.” This has led to disappointing iPhone sales figures over the past few years.
With the iPhone 12, experts said that 5G connectivity could be a big change to encourage hundreds of millions of Apple users to upgrade. The fast download speed and low latency that make 5G possible can provide a better experience by using Apple services like Apple Arcade.
However, there are big questions surrounding the launch of the iPhone 12: Will people really try to upgrade during the economic recession caused by the pandemic? And would 5G networks still be in their early days, would consumers experience enough difference to even want to?
DA Davidson analyst Tom Forte said in a comment last week that he thinks Apple’s range of 5G smartphones is ‘better positioned than investors fully appreciate’, in part due to offers by the company.
There may also have been a jump in iPhone sales during the December quarter, not because of 5G, but because consumers have not upgraded for a few years and want other benefits, such as the impressive range of camera features of the iPhone 12, Ellegard said.
For consumers who did upgrade during the fourth quarter, several analysts say they expect more sales of 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,” Ellegard said. “People are spending more time on their phones, playing games, video calls, and even just typing emails. Upgrade to the Pro or Pro Max to have the larger screen size … I think this is where people are going to spend their money . ”
What will analysts still look at?
The iPhone was not the only major Apple product sold 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 series powered by internally designed chips.
But analysts are likely to pay particular attention to the performance of Apple’s service segment. Although iPhones drive the company’s biggest revenue, it’s increasingly working to become more of a service business.
Apple’s fitness subscriber offering, Fitness +, was launched during the quarter. And the ongoing pandemic and ongoing home orders could boost the growth of subscribers for Apple TV +.
Gradient’s Ellegard said the continued growth of Apple’s inventory probably has a lot to do with the services.
“People change how they value the company,” he said. “It’s easier to predict future sales when you have the 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. Although early Biden moves like the overthrow of Trump’s travel ban were likely welcomed by Silicon Valley, Big Tech is still facing major challenges in Washington DC.
“We see the potential for a return to a higher corporate tax rate as the biggest risk for Apple, from the change of guard to President Biden from President Trump,” DA Davidson’s Forte said in a note, adding that it could hurt Apple as well. . as Biden continues Trump’s tariff war with China. “We are seeking management comments on the risks.”
