Apple is expected to join the $ 100 billion club when the proceeds are released
Did someone say $ 100 billion? And then some? Wall Street analysts did. A consensus has been for Apple Inc (NASDAQ: AAPL) to join this diluted group of companies that topped the $ 100 billion quarterly revenue mark when it opened its books on Wednesday in its first fiscal quarter. That’s a record for AAPL, of course, and may have been helped by Christmas sales of its new iPhone 12. But it’s one of several new highs AAPL has achieved in a year – one that the company has recognized as having been shaken in many nooks and crannies of adversity. CFO Luca Maestri said the strong results in last quarter’s report were due to “the unmatched loyalty of our customers”. That may or may not be true, but when AAPL reports profits, investors will also be listening to how well AAPL is playing the market share game. The work-from-home trend fueled by the pandemic appears to have been a fundamental shift for AAPL, according to Morningstar analysts who believe it is driving sales of iPads, desktops and laptops. Anything that could be overshadowed by iPhone 12 Christmas sales in the first quarter of fiscal year, which is likely to be said, will get a fair share of attention on Wednesday afternoon after the closing bell. AAPL has always been an eye catcher when the earnings season is over, and now that it has a market cap of $ 2.34 trillion and hits new stock price highs, it looks like it’s sure to take a place in the spotlight, itself when it comes up against a variety of other high profile tech stock results this week. Tesla Inc (NASDAQ: TSLA) and Facebook, Inc. (NASDAQ: FB) report that same afternoon. Numbers Wall Street analysts expect AAPL sales to grow 12% year over year to around $ 103 billion, according to FactSet. However, some companies like Loup Ventures are looking for much stronger numbers: a 19% increase to $ 109.5 billion. From an earnings standpoint, the Street hit a consensus of $ 1.41 per share. Morgan Stanley (NYSE: MS) also forecasts a high consensus side, with revenues of $ 108.2 billion and earnings per share of $ 1.50. “Our recent discussions suggest that investors expect Apple to release solid but not great results for the December quarter,” Morgan Stanley analysts wrote in a recently released report. “We disagree and believe that Apple is expected to have record sales and quarterly results. “In our view, the iPhone 12 was Apple’s most successful product launch in the past five years,” they said. More on that later. Whichever way you look at it, the numbers look robust. The innovation machine AAPL no longer issued guidelines last year – similar to many other companies who are unsure about the impact of COVID-19 on their sales. In March, no one knew how the pandemic could affect or how long it could last. We still don’t know everything, but we’ve found that the city and state mandated quarantines and general fear of being in public helped fuel many trends that are already picking up speed. Digital transformation has accelerated, and it looks like AAPL was well positioned for that. While the iPhone 12 might get the most attention on Wednesday, think back to the last quarter when CEO Tim Cook set records for Mac and Services. Though he hadn’t given a forecast for the past quarter per se, he suggested double-digit gains for all product categories except the iPhone 12, which he believed would see single-digit gains. FIGURE 1: APPLE LEAVES THE INDEX IN THE DUST. Last year, Apple shares (AAPL – Candlestick) clearly outperformed the Nasdaq 100 index (NDX – purple line). Apple stock got off to a quick start in 2021, with investors appearing to be delighted with the earnings outlook for tomorrow’s first quarter. Data source: Nasdaq. Diagram source: TD Ameritrade’s thinkorswim® platform. For illustration only. Past performance does not guarantee future results. Mighty iPhone 5G Introduced Despite all the happy discussions about fourth quarter revenue, weaker-than-expected sales of the iPhone made up for the joy, dragging stocks down nearly 6% in the first few days after earnings were released in October. You have since recovered. AAPL reported iPhone sales of $ 26.4 billion for the fourth quarter of fiscal year, below the Street’s forecast of $ 27.73 billion. Much of that deficit was attributed to AAPL’s decision to postpone the iPhone 12 launch into the final quarter. Many believe that this caused consumers to wait for the upgrade before purchasing. Back then, some analysts said a move to 5G could be a tailwind for the iPhone 12 with promotional and subscription service packages. Coupled with the major Christmas business season ahead, this could have resulted in a quick start for the new phone. We’ll see now if they were right. Analysts are largely optimistic about their iPhone sales expectations. Some say the delay could have increased iPhone sales by around $ 4 billion by the December quarter from the third quarter of fiscal. The street’s consensus was last at $ 59.58 billion, up more than 6% year over year. But Loup Ventures thinks that’s conservative. Revenue is expected to grow 16% year over year to $ 64.9 billion, which is 59% of total revenue compared to the typical 50% of iPhone sales. It’s unclear if it actually will, but if it does, it would reverse the trend in recent years for iPhones to contribute less to AAPL’s overall sales. The company has emphasized growth in services. Remember, we are only two years after January 2019 when Cook sent a letter to AAPL investors warning of a decline in earnings in the first quarter, partly due to weak iPhone sales in China. How things have changed. AAPL Earnings and Options Activity AAPL is expected to post adjusted earnings per share of $ 1.41, according to estimates by third party consensus analysts, down from $ 1.25 in the year-ago quarter. Revenue is forecast at $ 103.01 billion, up 16.4% year over year. According to the Market Maker Move ™ indicator on the thinkorswim® platform, the options market has priced in an expected price movement of 6.2% in both directions around the profit publication. With the options expiring on Jan. 29, the puts on strikes 125 and 135 were active. But it has been dwarfed by upward activity, heavy call volume on strikes 145 and 150. Implied volatility is at the 34th percentile on Tuesday morning. Note: Call options represent the right, but not the obligation, to buy the underlying security at a specified price over a specified period of time. Put options represent the right, but not the obligation, to sell the underlying security over a specified period at a specified price. Working from Home and Its Tools The phenomenon of working and studying from home has contributed to spike in sales of Macs and iPads over the past year, and analysts generally expect that trend to continue into the first quarter of the fiscal year. New iPads and iPad Airs came out with a range of bells and whistles, and new computers launched with AAPL’s custom M1 chip, which replaces the Intel Corporation (NASDAQ: INTC) chip. AAPL is also reportedly working on a new iPad Pro, which is expected to be released in mid-March. There is also talk 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 productive phase of launch,” analysts generally expect more new products to go online. 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 matter. Analysts wanted to know whether the planned release in the second half of the year is on the right track. Analysts at Monness, Crespi, Hardt & Co. expect AAPL to shed light on a number of new products and services, including sales trends for the $ 549 AirPods Max over-the-ear headphones and Apple Fitness’ subscription offering + as well as options for bundling services together for a discount. “We believe Apple’s portfolio was better positioned than ever over the last holiday season, while Planet Apple’s product and service updates position well in 2021,” the team wrote. And So Much More. Among the myriad of reasons AAPL revenues are so high that products aren’t just products. AAPL has done a lot to address many of these issues, but each quarter tends to introduce a new harvest. For example, in November, AAPL announced that it would cut commission in half for smaller developers who sell software through the App Store and have sales below $ 1 million. AAPL’s original 30% adoption has long led to complaints from developers, users, and governments about its dominance in the digital world. The price cut to 15% has reassured some but not all stakeholders and analysts in the hope that the company will look at the effects of the cuts in the first few weeks. Another question about the outcome is AAPL’s cash position. At the end of the company’s fourth fiscal year, total holdings were approximately $ 192 billion, with approximately $ 112 billion in debt and just over $ 79 billion in cash. AAPL returned nearly $ 22 billion to shareholders in buybacks and dividends. According to Loup Ventures, investors can expect another $ 73 billion to be returned in the coming years. TD Ameritrade® commentary for educational purposes only. Member of SIPC. Options involve risks and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options. Photo by Trac Vu on Unsplash For More Info From Benzinga Click here for option trades from BenzingaBoeing .com. Benzinga does not offer investment advice. All rights reserved.