Reports Q1, 2021 results on Wednesday, Jan. 27, after market close
Expected Revenue: $ 102.54 Billion
EPS Forecast: $ 1.39
When Apple (NASDAQ 🙂 reports first quarter fiscal year 2021 earnings later in the day, investors will look for evidence that sales of the company's newer iPhone models are picking up after a significant slowdown during the pandemic.
When the Cupertino, California-based company reported revenues for its business in October, it made no prediction for the main holiday quarter ending in December, citing uncertainty caused by the COVID-19 pandemic.
However, Chief Executive Officer Tim Cook said the new iPhone 12 line has been well received. Macs and services sales also hit record highs in the fiscal fourth quarter.
Wednesday's earnings report marks the first full season since Apple released its new line of iPhones and subscription service bundles. Investors are betting that the new phone with 5G cellular connectivity will be the catalyst for a boom in sales, possibly hitting the previous record of 231 million units in fiscal 2015.
Aided by this optimism, Apple shares rallied 21% Monday to $ 139.07, hitting another record high. They won again yesterday to close at $ 143.16. The stock is up 75% in the last 12 months.
Since the COVID outbreak, Apple has shown it is well positioned to weather the pandemic-induced recession, aided by its services businesses, wearable products and its stock buyback program.
A Record December Quarter
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As Apple sales peaked in recent years, the company changed its strategy to introduce higher-end iPhone models while bolstering its services businesses such as video and fitness apps, for use on more than 900 million iPhones worldwide.
Its service unit, which more than doubled in fiscal 2019 compared to five years earlier, produced 16% growth in the most recent quarter. It is expected to show another strong performance during this stay home period.
In a note last week, Morgan Stanley analysts said they expect a record quarter in December, aided by Apple's most successful product launch in the past five years:
“Our recent talks suggest investors expect Apple to post solid, but not great, quarterly results for December. We disagree and think Apple is likely to report record quarterly sales and earnings. "
The bank's analysts raised their target price from $ 144 to $ 152.
In addition to strong momentum in the company's services sector, investors also hope that Apple continues to drive innovation, along with new ways to use technological hardware and software to boost sales once the pandemic has been suppressed.
Still, it would be wise for investors not to ignore potential risks that could hinder Apple's growth in the short term, especially when the global economy is in recession and the pandemic continues to rage. Keep an eye out for users staying on their phones for longer or wanting to upgrade, even in tough economic conditions.
Bottom Line
The company's Q1 2021 earnings report is likely to exceed expectations due to robust sales of its newer phone models and improved performance of its services business. If that happens, it will clearly reinforce the argument that Apple's strong global brand, cash position, and drive to diversify Apple's revenue stream make it a great stock to own over the long term.
