The consensus seems to be that sales of the new device will be very strong, although a “supercycle” may take more than a quarter to play out.
Many analysts think iPhone 12 sales could hit record December quarter results, with Apple’s quarterly revenue above $ 100 billion for the first time.
“All the signs point to a strong quarter launch of the iPhone 12,” Morgan Stanley analysts wrote in a note to investors last week. “In our opinion, the iPhone 12 has been the launch of Apple’s most successful product in the last five years.”
Wall Street expects Apple to post $ 1.41 earnings per share on total quarterly sales of $ 103.3 billion, up 12.5% income from the same period last year, according to Refinitiv.
Analysts’ consensus is that iPhone sales will reach $ 59.8 billion, an increase of almost 6.9% year-on-year, but it is a lower growth rate than iPhone sales recorded during the same period of the previous year. (Some individual analysts have increased iPhone sales for the December quarter).
apple (AAPL) Executives said last quarter they expected one-digit percentage growth in iPhone sales during the three months ended Dec. 31.
“Based on Asian supply chain checks, we firmly believe that the iPhone 12’s supercycle hype has become a reality,” Wedbush analyst Dan Ives said in a statement. ‘investment last week.
The earnings report also comes as Apple shares have continued to rise in recent weeks. Its shares have risen nearly 85% over the past year, and its market cap this week has reached a record high of $ 2.4 trillion.
Why so much pressure on the iPhone 12?
Expectations are high for the iPhone 12, as it is the first Apple device that can connect to 5G, the super-fast wireless networks that hope to create new capabilities for consumers and businesses.
The latest iPhone releases “haven’t given users a reason to upgrade,” said Tyler Ellegard, an investment analyst at Gradient Investments. This has led to disappointing iPhone sales numbers in recent years.
With the iPhone 12, experts have said that 5G connectivity could be a big enough change to encourage hundreds of millions of Apple users to upgrade. The fast download speeds and low delay time that 5G allows could provide a better experience with Apple services like Apple Arcade.
However, there are important questions about the launch of the iPhone 12: Will people really be paid to get an upgrade during the economic recession caused by the pandemic? And with 5G networks still in their infancy, would consumers experience enough differences to want them?
DA Davidson analyst Tom Forte said in a note last week that he believes Apple’s 5G smartphone range is “better positioned than investors fully appreciate,” in part because of the operator promotions.
There may also have been a jump in iPhone sales during the December quarter, not because of 5G, but because consumers haven’t upgraded in a few years and want other perks, such as the impressive range of iPhone 12 camera functions, Ellegard said.
For consumers who upgraded during the fourth quarter, several analysts say they expect more sales from the high-end versions of the iPhone 12, Pro and Pro Max, a potential increase in the company’s gross margins.
“It has a lot to do with working from home,” Ellegard said. “People spend more time on their phones, playing video calls, even typing emails. Upgrading to Pro or Pro Max to have a bigger screen size … I think that’s where people will spend their money.”
What else will analysts see?
The iPhone wasn’t the only big Apple product to go on sale in recent months. The company also launched the eighth-generation iPad and a redesigned iPad Air, the Apple Watch Series 6 with new clock faces and health control features, and a new line of Mac-powered home-designed chips.
But analysts are likely to pay special attention to the performance of Apple’s services segment. While iPhones remain the company’s main revenue driver, it has been increasingly working to become a service business.
Apple’s fitness subscription offer, Fitness +, was launched during the quarter. And the ongoing pandemic and continued orders to stay home may have boosted the growth of Apple TV + subscriptions.
The persistent growth in Apple’s shares probably has a lot to do with the services business, Gradient’s Ellegard said.
“People are changing the way they value the company,” he said. “It’s easier to predict future sales when you have recurring subscriptions, and it’s also a higher-margin business. It’s a better business model, to be honest.”
Apple executives could also provide information on what they are thinking about the potential impact of the new administration on their business during Wednesday’s earnings call. While Biden’s early moves, such as the repeal of Trump’s travel ban, were well received by Silicon Valley, Big Tech continues to face major challenges in Washington DC.
“We see the potential for a return to a higher corporate tax rate as the biggest risk for Apple, since the change of guard on President Trump’s President Biden,” DA Davidson’s Forte said in a note , which added that it could also harm Apple. if Biden continues Trump’s tariff war with China. “We are looking for management feedback on these risks.”
