Even a pandemic cannot stop Apple Inc. get new records.
The smartphone giant is expected to post its first quarter with more than $ 100 billion in revenue on Wednesday, driven by strong initial performance from its new iPhone 12 line, as well as continued demand from Macs and iPads for remote work and school needs.
Apple’s AAPL,
first-quarter fiscal results will be the first to include sales of the iPhone 12 device family, which began rolling out in October. While Apple faced supply restrictions on some models, the debut of Apple’s first 5G-enabled phones has arguably been the company’s most successful product launch in five years, according to opinion of Morgan Stanley analyst Katy Huberty.
It seems that customers are increasingly opting for higher priced iPhone models and more expensive storage configurations, which would increase the average selling price of the devices and help the company’s profit margin. Apple no longer provides unit sales metrics that shed light on its average selling prices, but the company usually offers qualitative feedback on which devices perform best.
Apple has also seen strong sales of Macs and iPads amid the pandemic, with more people working and studying from home, and that momentum is expected to continue during the first fiscal quarter. The company launched new iPads late last year, as well as its first computers with the company’s own custom chip.
Analysts expect record performance for the company’s services category as well, though one area may not hold up as well. Apple has done a good job transiting sales to its online store given the COVID-19 crisis, but “relies excessively on customer purchases in the store” to boost sales of its AppleCare insurance product, he wrote Huberty.
What to expect
Earnings: Analysts tracked by FactSet expect Apple to earn $ 1.41 per share in the December quarter, up from $ 1.25 the previous year. At Estimize, which crowdfunding sources calculate from expression funds, academics, and others, the average projection requires $ 1.45 per share.
Income: The FactSet consensus models a record revenue of $ 102.54 million for Apple’s first fiscal quarter, up from $ 91.82 million the previous year. The Estimate consensus is $ 103.76 million.
Analysts tracked the $ 59.58 million iPhone revenue FactSet model for Apple, up from $ 55.96 million the previous year. Apple declined to give formal guidance for the quarter on the latest earnings call, but chief financial officer Luca Maestri said at the time he expects revenue growth for the iPhone, although the devices would begin to ship. later in the quarter than they did a year earlier.
The FactSet consensus calls for $ 7.383 billion in Pad revenue, above $ 5.988 billion; $ 8.63 million in revenue for Mac, above $ 7.166 billion; $ 15.17 billion in service revenue, compared to $ 12,722 million; and $ 11.49 million in revenue for the category of household products, household items and accessories, above $ 10.01 million.
Movement of values: Shares of Apple have gained after three of the last five earnings reports, and shares have risen 72% over the past year as the Dow Jones Industrial Average DJIA,
which has Apple as a component, has gained 7%.
Of the 41 analysts followed by FactSet covering Apple shares, 28 have buy ratings, 10 have hold ratings and three have sell ratings, with an average target price of $ 132.71
What else to look at?
Apple has declined to offer a quantitative financial forecast on each of its last three earnings reports due to uncertainty related to the COVID-19 pandemic, and the trend is likely to continue this quarter.
“In the face of persistent uncertainty, we expect Apple to be more likely to provide‘ guidelines ’rather than‘ guides ’for the second quarter,” Bernstein analyst Toni Sacconaghi wrote in a note to customers. In addition to the many unknowns surrounding the pandemic, Apple’s late release time for the latest batch of iPhones means the March quarter could be stronger than usual, as there were fewer “days for sale “of the iPhone 12 before.
Sacconaghi will also monitor comments about Apple’s ongoing dispute with Epic Games-led app developers, which sued Apple and claimed the company’s App Store rules about in-app purchases they are monopolists. Apple reduced the commission rates of the smaller developers that make up most of those in the App Store, though those developers don’t contribute too much to Apple’s overall revenue from the platform.
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“We believe Apple’s decision to reduce commissions was politically astute, which allowed the company to portray itself as a small business promoter, while also superficially addressing the complaint that its high store rates ‘Applications stifle competition and innovation,’ wrote Sacconaghi, who has a market performance and a target price of $ 120 in shares. “It remains to be seen whether Apple will provide more comments on this issue; that said, we continue to believe that the legal risk to App Store revenue is low. “
Huberty, of Morgan Stanley, is interested in boosting the company in China. He suspects the company is benefiting from Huawei’s weakness, citing data suggesting customers are switching from Huawei devices to Apple at the highest rate in 15 months. It has an overweight rating and a target price of $ 152.
Goldman Sachs analyst Rod Hall echoed the issue over Huawei’s challenges, though he worries “that Apple has already started downsizing iPhone orders” and that construction orders for the first mid-2021 suggest a move toward models with lower average selling prices.
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“These changes are consistent, in our view, with a normal iPhone redesign cycle, but they are not consistent with a supercycle,” he wrote. “As a result, we continue to expect iPhone replacement rates to resume their continued decline in 2021.” Hall has a sales rating and a $ 85 target price on Apple shares.
Monness, Crespi, Hardt & Co. analyst Brian White highlights several new products and services that Apple could shed light on during the quarterly call. During the December quarter, the company began selling its AirPods Max wireless headphones and launched a subscription fitness offer and a way to bundle the service for a discount.
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“In our view, Apple’s portfolio ranked better than ever toward the recent holiday season, while product and service updates position Apple Planet well in 2021,” he wrote. White has a buy rating and a $ 144 target price on Apple shares.