Benzinga
Apple expects to join the $ 100 billion revenue club when earnings are released
Did someone say $ 100 billion? And then some? Wall Street analysts do. Consensus sees Apple Inc (NASDAQ: AAPL) as joining that rarefied corporate crowd that broke the $ 100 billion mark in quarterly revenue when it opened the books on Wednesday in its first fiscal quarter. It is a record for AAPL, of course, and may have been helped by the year-end sales of its new iPhone 12. But it is one in a series of new peaks that AAPL reached in a year – one that the company acknowledged having been shaken by adversity in many corners. CFO, Luca Maestri, said the solid results of the last quarter’s report were driven by “our customers’ unparalleled loyalty”. This may or may not be true, but when AAPL reports profits, investors will also hear how AAPL is playing the game of market share. The trend of working from home, fueled by the pandemic, appears to have been a game changer for AAPL, according to analysts at Morningstar who believe it has boosted sales of iPads, desktops and laptops. All of this could be overshadowed in the first fiscal quarter by the Christmas sales of the iPhone 12, which will probably be safe to say will receive a good deal of attention on Wednesday afternoon after the closing bell. AAPL always drew attention when the earnings season was approaching and now, with a market value of $ 2.34 trillion and reaching new peaks in stock prices, it looks like it will certainly win a spot in the spotlight, even when it is facing a host of other high profile technology stock earnings results this week. Tesla Inc (NASDAQ: TSLA) and Facebook, Inc. (NASDAQ: FB) report the same afternoon. Numbers Wall Street analysts expect AAPL’s revenue to jump 12% year on year, to about $ 103 billion, according to FactSet. But some companies, like Loup Ventures, are looking for much stronger numbers: up 19% to $ 109.5 billion. From a profit standpoint, Street reached a consensus of $ 1.41 per share. Morgan Stanley (NYSE: MS) is also forecasting on the high side of the consensus, targeting revenues of $ 108.2 billion and earnings per share of $ 1.50. “Our recent conversations suggest that investors expect Apple to report solid, but not great, results in the December quarter,” wrote Morgan Stanley analysts in a recent report. “We disagree and believe that Apple is likely to post record quarterly earnings and earnings of all time. “In our opinion, the iPhone 12 was Apple’s most successful product launch in the past five years,” they said. More on that later. Either way, the numbers look robust. Innovation Machine AAPL stopped providing guidance last year – like many other companies uncertain about the ramifications of COVID-19 in their sales. In March, no one knew what the effects of the pandemic’s rebound could be or how long it could last. We still don’t know all that, but we found that the quarantines imposed by the city and the state and the general fear of being in public helped to accelerate many trends that were already gaining momentum. The digital transformation has accelerated and it seems that AAPL may have been well positioned for this. While the iPhone 12 may receive most of the attention on Wednesday, think of the last quarter, when CEO Tim Cook observed all-time records for Mac and Services. Although he did not offer guidance for the last quarter itself, he did suggest double-digit gains in all product categories except the iPhone 12, which he thought would achieve single-digit gains. FIGURE 1: INDEX OF APPLE LEAVES IN THE POWDER. In the last year, Apple’s shares (AAPL – candle) easily surpassed the Nasdaq-100 index (NDX – purple line). Apple’s stock started off quickly in 2021, with investors apparently enthusiastic about tomorrow’s first quarter earnings outlook. Data source: Nasdaq. Graphic source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results. The powerful launch of the iPhone 5G Despite all the happy talk about tax revenues for the fourth quarter, the weaker-than-expected sales of the iPhone offset the joy and pulled the shares down by almost 6% in the first days after the launch of the October profits. They have already recovered. AAPL reported iPhone sales of $ 26.4 billion in the fourth fiscal quarter, down from the $ 27.73 billion expected by Street. Much of that deficit was attributed to AAPL’s decision to push the iPhone 12 launch into the most recent quarter, a move that many believe may have led consumers to wait for the update before buying. At that time, some analysts said that a move to 5G could end up being a trend for the iPhone 12, with sales promotions and subscription service packages. This, combined with the important holiday shopping season just around the corner, could have led to a quick start for the new phone. We will now see if they were right. Analysts are mostly optimistic about their iPhone sales expectations, with some saying that the delay may have pushed about $ 4 billion in iPhone sales into the December quarter from the third fiscal quarter. The Street consensus stood at $ 59.58 billion, an increase better than 6% over the previous year. But Loup Ventures thinks this is conservative. He expects sales to increase 16% from the previous year, to $ 64.9 billion, jumping to 59% of total sales compared to the typical 50% of iPhone sales. It is unclear whether this will really be the case, but if it is, it would reverse the trend in recent years that iPhones represented less of AAPL’s total revenue. The company has been emphasizing growth in services. Remember, January 2019 is only two years away when Cook sent a letter to AAPL investors warning of a drop in first quarter tax profits due in part to weak iPhone sales in China. How things have changed. AAPL earnings and option activities AAPL is expected to report an adjusted EPS of $ 1.41, up from $ 1.25 in the prior year quarter, according to estimates by third party consensus analysts. Revenue is projected at $ 103.01 billion, an increase of 16.4% over the previous year. The options market has been pricing an expected 6.2% change in share prices in any direction around earnings disclosure, according to the Market Maker Move ™ indicator on the thinkorswim® platform. Looking at the expiration of the options on January 29, the put options are active in strikes 125 and 135. But it was overshadowed by activity on the positive side, high volume of calls in the occurrences of 145 and 150. The implied volatility is at 34 percentile on Tuesday morning. Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price for a specified period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a period of time. Work at home and your tools The work and study at home phenomenon helped boost sales of Macs and iPads last year, and analysts expect this trend to continue in the first fiscal quarter. A series of bells and whistles have been added to the new iPads and iPad Airs, and new computers with the custom M1 chip from AAPL to replace the Intel Corporation chip (NASDAQ: INTC) have also hit the market. AAPL is also reportedly working on a new iPad Pro that is due to launch in mid-March. There are also rumors on Wall Street that AAPL may have patented a new version of the Magic Keyboard for the iPad Pro. Given Cook’s comments on the “most prolific product launch period,” analysts expect to hear about other new products that go into operation. An update to the MacBook Air is one of those possible developments. AAPL is working on a thinner and lighter version of the MacBook Air, Bloomberg reported late last week, citing “people with knowledge of the subject. Analysts said they want to know if the planned launch for the second half of this year is on track. Analysts at Monness, Crespi, Hardt & Co. expect AAPL to shed light on a number of new products and services, including how sales of its $ 549 AirPods Max headphones and Apple Fitness + subscription offer are in addition to ways to bundle services together for a discount. “In our opinion, the Apple portfolio was better positioned than ever in the recent holiday season, while product and service updates position the Apple Planet well in 2021,” wrote the team. And much more Among the countless reasons why AAPL’s earnings are a magnet that goes beyond products Other factors that highlight the company’s progress range from privacy concerns to application developer fees to government interventions and the economy in general. AAPL has done a lot to solve many of these problems, but each quarter tends to present a new crop. In November, for example, AAPL said it would cut in half the commissions it charges smaller developers who sell software through the App Store and generate less than $ 1 million in sales. AAPL’s original 30% take has long fueled complaints from developers, users and governments about its dominance in the digital world. The 15% price cut has appeased some, but not all, stakeholders and analysts expect the company to assess how the cuts are occurring in the first few weeks. Another issue related to profit is AAPL’s cash position. The total cash treasury was approximately $ 192 billion at the end of the company’s fourth fiscal quarter, with about $ 112 billion in debt and just over $ 79 billion in cash. AAPL returned nearly $ 22 billion to shareholders in the form of repurchases and dividends. Investors can expect to continue to see this ahead, according to Loup Ventures, which estimates that an additional $ 73 billion will be returned in the coming years. TD Ameritrade® reviews for educational purposes only. SIPC member. The options involve risks and are not suitable for all investors. Read Characteristics and risks of standardized options. Photo of Trac Vu in Unsplash See more of BenzingaClick here for Benzinga options tradingBoeing Gains ahead: eyeing workforce cuts, aerospace spending and the recently “ungrounded” 737 MAXEarnings continue with Johnson & Johnson, 3M Early, followed by Microsoft later © 2021 Benzinga .com. Benzinga does not provide investment advice. All rights reserved.