Following release of its iPhone 12 models towards the middle of the December quarter, the devices are expected to help boost the smartphone giant to a quarterly revenue record to the tune of an impressive $100 billion.
On December 29, Apple shares hit $138.78 in intraday trading with the stock seeing an almost 90% gain across 2020. A recent gain of 1.61% was enough to move AAPL to a new all-time high, closing at $139.07.
Thanks to the continued demand for Macs and iPads for school and remote work, and the success of its new iPhone 12 line, Apple is expected to post its first $100 billion quarter in revenue this Wednesday.
Apple's AAPL first-quarter results are the first to include iPhone 12 devices sales following initial rollout in October. Despite facing supply constraints on some models, analysts view the launch of Apple's first 5G-enabled phone as the company's most successful debut in five years.
Trends show consumers choosing more expensive iPhone models with higher-priced storage configurations, thus boosting average selling prices and increasing the company's profit margin. Although Apple no longer provides unit-sales metrics, but usually offers comments about which devices perform best.
With the necessity of remote work and study during the pandemic, Apple has also enjoyed strong sales of Macs and iPads, a momentum expected to have continued into the fiscal first quarters. Last year, the company also launched its first computers to feature the company's own custom chip and new iPads.
Analysts also predict record performance for the company's services category, though one area may not fare as well. Morgan Stanley analyst Katy Huberty wrote that despite doing a good job of transitioning sales to online stores, Apple is "overly reliant on in-store customer purchases" to drive sales of its insurance product AppleCare.
Analyst data shows that Apple earned $1.41 a share in the December quarter, an $0.16 increase from the December 2019 figure of $1.25, and on Estimize, which crowdsources estimates from academics and hedge funds amongst others, the average projection is for $1.45 a share.
The Estimize revenue consensus predicts a record $103.76 billion for Apple's fiscal first quarter, while FactSet predicts $102.54 billion, up from $91.82 billion a year earlier.
Analysts tracked by FactSet model $59.58 billion in iPhone revenue for Apple, a $3.62 billion increase from the prior year's $55.96 billion. Despite Apple declining to give formal guidance for the quarter on the last earnings call, at the time Luca Maestri, Chief Financial Officer, said to expect growth in iPhone revenue regardless of device shipping beginning later in the quarter than it did a year before.
The FactSet consensus calls from $11.49 billion in revenue for the accessories, home, and wearables category, up from $10.01 billion, $8.63 billion in Mac revenue, a $1.47 increase from $7.16 billion, $7.38 billion in iPad revenue, a $1.4 billion increase from $5.98 billion, and $15.17 billion in services revenue, a $2.42 increase from $12.72 billion.
Following three of the past five earnings reports, Apple shares have gained and are currently up 72% over the past year. The Dow Jones Industrial Average, which counts Apple as a component, has also gained 7%. The average price target of the 41 analysts who cover Apple's stock is $132.71. 28 have buy ratings, 10 have hold ratings and three have sell ratings.
Due to the uncertainty generated by COVID-19, Apple has declined to give a quantitative financial forecast during its last three earnings reports, a trend likely to continue this quarter.
Bernstein analyst Toni Sacconaghi thinks that Apple is more likely to provide Q2 'guidelines' rather than 'guidance' due to lingering uncertainty. The March quarter could also be stronger than usual thanks to Apple's late launch timing of the latest batch of iPhones, since there were fewer iPhone 12 “selling days” leading up to it.
Analysts will also be closely watching Apple's ongoing dispute with app developers led by Epic Games, who sued Apple and claimed that the company’s App Store rules around in-app purchases are monopolistic. Despite the lesser contribution of smaller developers to Apple’s overall revenue from the platform, Apple lowered their commission rates, perhaps because they make up the bulk of the App Store.
Katy Huberty is also interested in the company’s China momentum, and suspects that Apple is benefiting from Huawei’s weakness, with data suggesting that customers are switching to Apple from Huawei devices at the highest rate in 15 months. She has a $152 price target on the stock and an overweight rating.
Goldman Sachs analyst Rod Hall, who has a sell rating and $85 target price on Apple shares, also agreed to the point about Huawei’s challenges, despite concerns that “Apple has already begun cutting iPhone orders” and that the first half of the year's build orders point to models with lower average selling prices. Hall also predicts an ongoing decline in iPhone replacement rates this year.
During the December quarter, the company also launched a subscription fitness offering, began selling its Airpods Max over-the-ear headphones and offered a way to bundle service together for a discount. And thanks to the range of products planned for this year such as a redesigned iMac, AirTags, and more Apple Silicon MacBook Pro machines, it looks like a good year ahead for the smartphone giant.