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Expectations about Apple’s earnings have steadily risen.
Don Emmert / AFP via Getty Images
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enters its financial results for the December quarter, with its shares at an all-time high. Wall Street expectations have risen steadily, with particularly high expectations on iPhone sales after the company began initial sales of the iPhone 12 line in the middle of the quarter.
The Street also has high hopes for MacBook sales, driven by the debut of the first Apple-designed processor-powered laptops and a continued tailwind of the pandemic-driven work-from-home trend. Expect expectations of continued and strong demand for iPads, laptops and services, and you already have the recipe for a strong quarter.
The only question is whether expectations have gone too far.
Apple (ticker: AAPL) did not provide any guidance for the quarter, which adds an element of volatility to this report. The consensus on the street calls for $ 102.8 billion in revenue and a profit of $ 1.40 per share. For the smoothest March quarter of the season, the street recorded $ 78.9 billion in revenue and earnings of 90 cents per share.
Street consensus estimates followed by FactSet call for iPhone revenue to increase 6.4% to $ 59.6 billion, with double-digit growth in the other categories. The consensus is that iPad sales are $ 7.4 billion, up 23.4%; Mac sales of $ 8.6 billion, up 20.4%; portable sales of $ 11.5 billion, up 14.8%; and revenue of services of $ 15.2 billion, up 19.3%.
Investors will also be interested to see if the company provides profit guidance again.
On Friday, Cowen analyst Krish Sankar repeated his Outperform score at Apple and raised its target price to $ 153, from $ 133. Sankar expects the company to exceed quarterly expectations on both the top and bottom lines, driven mostly by strong iPhone demand. It is projecting $ 104.5 billion in revenue and earnings of $ 1.46 per share. The analyst estimates that Apple sold 77 million iPhones in the quarter, 97% more sequentially and 7% year-over-year. It sees iPhone revenue of $ 60.1 billion, up 7% from a year ago, and revenue from services is up 26% to $ 16 billion. Apple remains Sankar’s first choice in the computer hardware industry.
Morgan Stanley analyst Katy Huberty last week reiterated its rating of overweight in Apple shares, raising its price target from $ 144 to $ 152. She writes that, according to her checks, Apple experienced strength in its product and service portfolio during the quarter, driven by the adoption of iPhone 5G, the trend to work and learn from home, and sustained commitment to the App Store.
“We are buyers ahead of what we expect to be a record impression for the December quarter,” Huberty wrote in a research note. “Our recent conversations suggest that investors expect Apple to post solid, but not fantastic, results for the December quarter. We disagree and believe Apple is likely to report record quarterly revenue and earnings.”
Huberty expects double-digit revenue growth in all revenue segments, with “biased risks on the rise” for iPhone, Mac and Services. Its revenue estimate for the quarter is $ 108.2 billion, well above the consensus of $ 102.6 billion. She sees profits for the December quarter of $ 1.50 per share, above the street at $ 1.40.
Huberty believes the iPhone 12 was the launch of Apple’s most successful product in the last five years. It expects 78 million iPhones shipped in the quarter at an average retail price of $ 825, up 14% in revenue to $ 63.9 billion, double the growth rate the street consensus currently predicts for iPhone revenue.
Loop Capital analyst Ananda Baruah recently repeated her Buy rating, raising its target price to $ 155 from $ 131. Baruah wrote in a research note that he expects a “really big year” for Apple and believes the signs should be clear with the next earnings report. Baruah believes there could be a material rise in street numbers both in the short term and throughout the 2021 calendar, driven by force on both iPhones and Macs. Baruah also believes the company could be seen on the rise in the healthy growth of the iPad, AirPod, Watch and Services.
Evercore ISI analyst Amit Daryanani recently repeated its Operperform score on Apple shares while raising its stock price target to $ 135 ($ 135). Daryanani noted a combination of better-than-expected unit demand and higher-than-expected average selling prices, as consumer demand evolves toward the high-end Pro and Pro Max versions of the new phone line. He also noted “better service growth,” given more than 30% growth in App Store downloads.
Shares of Apple closed Monday with a record $ 142.92. After reaching 82% last year, shares are approaching 8% so far in 2021.
Write to Eric J. Savitz to [email protected]