Prepare for the first quarter of Apple’s $ 100 billion story

Apple rolls out new iPhone 12 Pro and iPhone 12 Pro Max devices with camera upgrades

Even a pandemic can’t stop Apple Inc. from hitting new records. The smartphone giant is expected to post its first quarter with more than $ 100 billion in revenue on Wednesday, fueled by strong early performance from its new iPhone 12 line as well. as continued demand for Mac and iPad for remote work and school needs.

Apple’s AAPL fiscal first quarter results, + 1.80%, will be the first to include sales of the iPhone 12 family of devices, which began rollout in October. Although Apple faced supply restrictions on some models, the debut of Apple’s first 5G-enabled phones has been arguably the company’s most successful product launch in five years, in the opinion of Morgan Stanley analyst Katy Huberty. Customers seem to be increasingly opting for higher-priced iPhone models and more expensive storage configurations, which would boost the average selling price of 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 generally offers some qualitative feedback on which devices perform best. Apple has also seen strong sales of Mac and iPads amid the pandemic, with more people working and studying from home, and that momentum is expected to have continued into the first fiscal quarter. The company launched new iPads late last year, as well as its first computers with the company’s custom chip. Analysts also expect record performance for the company’s services category, although one area may not hold up as well. Apple has done a good job transitioning sales to its online store due to the COVID-19 crisis, but it is “too reliant on in-store customer purchases” to drive sales of its AppleCare insurance product. Huberty wrote. What to Expect Earnings: Analysts tracked by FactSet expect Apple to earn $ 1.41 per share in the December quarter, down from $ 1.25 a year earlier. At Estimize, which makes collective estimates for hedge funds, academics and others, the average projection calls for $ 1.45 per share. Revenue: 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 consensus estimate is $ 103.76 billion. Analysts tracked by the FactSet model $ 59.58 billion in iPhone revenue for Apple, up from $ 55.96 billion a year earlier. Apple declined to give formal guidance for the quarter in the latest earnings call, but CFO Luca Maestri said at the time that he expected growth in iPhone revenue even though the devices would start shipping later. in the quarter than the previous year. The FactSet consensus calls for $ 7.38 billion in revenue from Pad, up from $ 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 wearable, home and accessories category, down from $ 10.01 billion. Stock Market Movement: Apple shares have gained after three of the last five earnings reports, and the shares are up 72% over the past year, as the Dow Jones Industrial Average DJIA, -0.33%, which counts at Apple as a component, has gained 7%. Of the 41 analysts tracked by FactSet who cover Apple stocks, 28 have buy ratings, 10 have hold ratings and three have sell ratings, with an average price target of $ 132.71. What else to keep in mind for Apple has refused to give a quantitative financial forecast in each of its last three earnings reports due to the uncertainty related to the COVID-19 pandemic, and the trend is likely to continue this quarter . “Given the persistent uncertainty, we expect Apple to provide more ‘guidance’ rather than ‘guidance’ for the second quarter,” Bernstein analyst Toni Sacconaghi wrote in a note to clients. In addition to the many unknowns surrounding the pandemic, Apple’s late launch of the latest batch of iPhones means that the March quarter could be stronger than usual, as there were fewer iPhone 12 “days to sell” prior. Sacconaghi will also be on the lookout for comments on Apple’s ongoing dispute with app developers led by Epic Games, which sued Apple and claimed that the company’s App Store rules on in-app purchases are monopolistic. Apple cut commission rates for the smaller developers who make up the bulk of those on the App Store, even when these developers don’t contribute much to Apple’s overall revenue from the platform. More on Apple and Epic: ‘Fortnite’ dispute could open floodgates for serious scrutiny from Apple small businesses, while also superficially addressing the complaint that their high app store fees are stifling competition and innovation, ”wrote Sacconaghi, who has a market performance rating and a $ 120 share price target. . “It remains to be seen if Apple will provide further comment on this issue; That said, we continue to believe that the legal risk to App Store revenue is low. “Morgan Stanley’s Huberty is interested in the company’s momentum in China. She suspects the company is profiting from Huawei’s weakness, citing data suggesting that customers are switching from Huawei devices to Apple at the highest rate in 15 months. She has an overweight rating and a $ 152 price target on the stock. Goldman Sachs analyst Rod Hall became echoes the point about Huawei’s challenges, though it worries “that Apple has already started cutting back on iPhone orders” and that construction orders for the first half of 2021 suggest a move toward models with lower average selling prices. For more: Apple Bear sheds cold water on the history of the ‘supercycle’ “These changes are consistent, in our opinion, with a normal iPhone redesign cycle, but they are not consistent with a supercycle,” he wrote. bió. “As a result, we continue to expect iPhone replacement rates to resume their continued decline in 2021.” Hall has a sell rating and a $ 85 price target on Apple stock. Brian White, an analyst at Monness, Crespi, Hardt & Co. highlights several new products and services that Apple could clarify during the quarterly call. During the December quarter, the company began selling its AirPods Max over-ear headphones and launched a subscription fitness offering and a way to bundle the service at a discount. Read: Apple is listening to the $ 549 price of the AirPods Max “In our opinion, Apple’s portfolio ranked better than ever before the recent holiday season, while product and service updates rank Planet Apple well in 2021” , wrote. . White has a buy rating and a $ 144 price target on Apple stock.