The consensus seems to be that sales of the new device will be very strong, although a “super cycle” may take more than a quarter to materialize.
Many analysts believe that iPhone 12 sales could generate record results in the December quarter, with Apple’s quarterly revenue rising to more than $ 100 billion for the first time.
“All signs point to a strong quarter for the iPhone 12 launch,” Morgan Stanley analysts wrote in a note to investors last week. “In our opinion, the iPhone 12 was Apple’s most successful product launch in the past five years.”
Wall Street expects Apple to post a profit of $ 1.41 per share on total quarterly sales of $ 103.3 billion, a 12.5% jump in revenue for the same period last year, according to Refinitiv.
Analysts’ consensus estimate is that iPhone sales will reach $ 59.8 billion, an increase of almost 6.9% year on year – but this is a slower growth rate than iPhone sales published during the same year. previous year. (Some individual analysts estimate that iPhone sales in the December quarter will be higher.)
Apple (AAPL) executives said they expected single-digit percentage growth in iPhone sales during the three months ending December 31.
“Based on our supply chain checks in Asia, we firmly believe that the hype of the iPhone 12 super cycle has become a reality,” said Dan Ives, an analyst at Wedbush, in a note to investors last week.
The earnings report also comes at a time when Apple’s stock has continued to rise in recent weeks. Its shares rose nearly 85% last year, and its market capitalization this week reached a record high above $ 2.4 trillion.
Why so much pressure on the iPhone 12?
Hopes are high for the iPhone 12 because it is the first Apple device that can connect to 5G, the super-fast wireless networks that should create new features for consumers and businesses.
The latest iPhone releases “haven’t given users a reason to upgrade,” said Tyler Ellegard, investment analyst at Gradient Investments. This has led to disappointing iPhone sales figures in recent years.
With the iPhone 12, experts say 5G connectivity could be a big enough change to encourage hundreds of millions of Apple users to upgrade. The fast download speeds and the low delay time that 5G allows can provide a better experience with Apple services, such as Apple Arcade.
However, there are important questions surrounding the launch of the iPhone 12: Will people really pay for an update during the economic recession caused by the pandemic? And with 5G networks still in their early days, would consumers experience enough difference to even want to?
DA Davidson analyst Tom Forte said in a note last week that he thinks Apple’s 5G smartphone line is “better positioned than investors appreciate”, in part because of 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 updated in a few years and want other advantages, like the impressive set of camera features on the iPhone 12, said Ellegard .
For consumers who upgraded during the fourth quarter, several analysts say they expect more sales of the more sophisticated versions of the iPhone 12, Pro and Pro Max, a potential increase for the company’s gross margins.
“A lot of that has to do with working from home,” said Ellegard. “People are spending more time on their phones, playing games, video calls, even just typing emails. Upgrading to Pro or Pro Max to get a bigger screen … I think that’s where people will spend their money.”
What else will analysts be watching?
The iPhone was not the only major 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 watch faces and health monitoring features, and a new line of Mac powered by internally developed chips.
But analysts are likely to pay special attention to the performance of Apple’s service segment. While iPhones continue to be the company’s biggest revenue generator, it has increasingly worked to become more of a service company.
Apple’s fitness subscription offering, Fitness +, was launched during the quarter. And the continuing pandemic and continued requests to stay at home may have driven the growth of the Apple TV + subscription.
The persistent growth of Apple’s shares probably has a lot to do with the services business, said Gradient’s Ellegard.
“People are changing the way they value the company,” he said. “It is easier to predict future sales when you have recurring subscriptions and it is also a higher margin business. It is a better business model, to be honest.”
Apple executives can also provide information about what they are thinking about the new management’s potential impact on their business during Wednesday’s earnings conference call. While Biden’s first steps, such as overturning Trump’s travel ban, were probably welcomed in 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, with the shift from President Trump’s guard to President Biden,” Forte DA Davidson said in a note, adding that it could also hurt Apple if Biden continues Trump’s tariff war with China. “We seek management’s comments on these risks.”
