The pandemic could add a wrinkle to the guessing game that usually accompanies Apple Inc.’s conference call in the June quarter.
Usually the main tidbit that emerges from fiscal third quarter results that Apple
AAPL, + 1.20%
Slated to be released Tuesday afternoon, is the company’s outlook and commentary on its September quarter sales, which may provide clues as to what the company expects in the early days of the next smartphone launch. A strong forecast could mean that the company intends to make its new line of products available in the fading days of the fiscal year, while weaker forecasts could suggest that the launch will be postponed to the fourth calendar quarter.
The problem this time around is that Apple has been holding back a formal outlook for more than a year amid the pandemic and it remains unclear when or if the company will resume the practice. Apple has instead offered “directional insights” to give an indication of how its results might fare against previous quarters, but it has been notoriously narrow-minded about plans to launch iPhones.
“We assume that when the iPhone 13 becomes available, it will ultimately prove to be the swing factor [the fiscal fourth quarter], so we expect the company to provide more detailed directional commentary, ”wrote Brian White, analyst at Monness, Crespi, Hardt & Co ..
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The upcoming launch is of great interest as the current lineup has performed well. “The iPhone 12 cycle has been strong, but we believe the next two cycles with potentially failed units could prove challenging [year over year] in FY22 and FY23, ”wrote Barclays analyst Tim Long.
The June quarter, which Apple will report on Tuesday, is traditionally a slower one as consumers wait for the next iPhone launch, but the company is still expected to see big growth in its smartphone business. Not only does the company benefit from simple comparisons to the early days of the pandemic, but it should also reap the rewards of an unusually touting wireless industry.
What to look out for
Merits: Analysts tracked by FactSet expect Apple to post earnings per share of $ 1.01, up from 65 cents last year. According to Estimize, which gathers predictions from hedge funds, academics, and others about crowdsourcing, the average expectation is $ 1.16 per share of EPS.
Revenue: The FactSet consensus predicts total revenue of $ 73.26 billion, up from $ 59.69 billion last year. At Estimize, the average estimate is $ 77.38 billion.
At the segment level, analysts surveyed by FactSet forecast iPhone sales of $ 34.19 billion, iPad sales of $ 7.17 billion, Mac sales of $ 7.86 billion, Service revenue of $ 16.26 billion and revenue of $ 7.83 billion for the wearables, home and accessories category.
Stock movement: Apple stock is down on four of the last five earnings reports, despite the fact that the stock is up 60% over the past 12 months while the Dow Jones Industrial Average is up 32%.
Of the 44 analysts that have been watched by FactSet and cover Apple stock, 33 have buy ratings, nine hold ratings, and two sell ratings with an average price target of $ 157.88.
What else to look out for
Apple’s iPhone business is set to grow at its second-largest growth rate in at least three years, down from what it saw in the previous quarter. Analysts tracked by FactSet claim iPhone sales of $ 34.2 billion, 29.4 percent more than last year.
Some encouraging signals came from Verizon Communications Inc.
VZ, -0.13%,
who recently ran a major iPhone promotion to get discounts from competitor AT&T Inc.
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“Momentum built over the quarter and we fine-tuned our promotions to take full advantage of the economic recovery and increased customer activity,” said Matthew Ellis, Verizon’s chief financial officer, on his company’s earnings conference call . About 20% of Verizon’s consumer base ares now with 5G-enabled phones.
Raymond James analyst Chris Caso noted that the number of upgrades might not even be the most important factor, as his analysis of last year’s iPhone carrier deals found that these can be helpful in making a larger “mix” of more expensive ones Devices to advance.
“Consumers seem willing to pay the few dollars a month to upgrade to higher-end models when the base model is offered free,” he wrote, based on an analysis of last year’s subsidies.
Read: How Silicon Valley is working again with a mask without a mandate
UBS analyst David Vogt is also optimistic about the business at the beginning of the financial report for the third quarter, pointing to positive signs in the telecommunications industry such as the “aggressive promotions” and the improvement in retail traffic in the wireless stores.
He points out, however, that demand for Apple may not be the big problem as the company’s overall upward trend is “limited” due to supply constraints that plague the electronics industry in general and beyond. Apple addressed these issues in their phone conversation. forecast negative impact on sales of $ 3 billion to $ 4 billion in the June quarter, which should mainly affect the Mac and iPad businesses.
Another important narrative is how these two segments generally held up on a return to normalized activities outside the home. Apple’s Macs and iPads have been popular purchases with those in need of new hardware for remote work and training, but analysts are looking to see if the PC boom is sustained.
“While Apple will have to contend with very difficult pandemic comparisons in the US” [June quarter] and for several quarters after that, we see momentum tailwinds from both categories, ”wrote CFRA analyst Angelo Zino. “We’re seeing corporate upgrades at the corporate level make a greater contribution to demand as the economy reopens fully around the world.”
The upcoming results will also be the first on-demand ad for Apple. being new colorful iMac range and powerful iPad Proboth launched in the spring and featuring the company’s custom M1 chip.
