Reports Q2 results on Wednesday, April 28, after market close
Expected Revenue: $ 76.71 Billion
Projected Earnings Per Share: $ 0.983
This time around, there isn't much excitement ahead of Apple's latest earnings report (NASDAQ :). Stocks underperformed and there are doubts the company will be able to exceed expectations as signs indicate blistering demand for its flagship iPhone is slowing in China, the company's second largest market.
Apple Weekly Chart.
After rising more than 75% in 2020, shares are up just over 1% this year. In comparison, the tech-heavy rose more than 9% over the same period. This cautious phase for the world's most valued company comes after a period of very impressive sales growth, aided by the launch of new products, including the iPhone 12.
Sales for the period ending December 26 exceeded $ 100 billion for the first time, amid expectations of a new iPhone "super cycle," where millions of existing users would upgrade legacy smartphones. The latest iPhone has the ability to access the next generation 5G cellular network, which promises faster internet speeds. In the last quarter of 2020, the new iPhone helped increase sales by 57% in China, which has a more developed 5G network.
The company also recently introduced other new devices, including a refreshed Apple Watch, as demand for iPads, Mac computers and services increased from consumers working and studying at home during the coronavirus pandemic.
In a recent note, JPMorgan analyst Samik Chatterjee wrote:
"The set-up of the upcoming earnings sprint is dramatically different from the previous one, with the focus on earning short-term revenues having been moderated significantly after peak holiday sales."
He also expressed concern about a weakening of iPhone sales in China.
iPad, Mac Demand Surge Unsustainable
Analysts at Goldman Sachs are also cautiously anticipating the earnings report.
Bank analyst Rod Hall said:
“In our view, the current high demand for both iPad and Mac is unlikely to be sustainable as the world reopens, so another blow more driven by these areas may not be enough to drive stocks further . "
Despite this short-term uncertainty, Apple & # 39; s stock remains a top recommendation due to the company's highly attractive product mix, innovation capabilities and growing services business.
Of the 27 analysts investigating the stock, 21 have given a buy rating, according to TipRanks, with a 12-month price target of $ 151.35. That's a jump of more than 11% from Tuesday's closing price of $ 134.39. The basis for this optimistic consensus? The company is well positioned to continue its growth momentum as the economy accelerates and consumers upgrade their devices.
The company's drive for innovation will play a key role in this new growth cycle. Apple is working on a product that would combine an Apple TV set-top box with a HomePod speaker and include a camera for video conferencing via a connected TV and other smarthome features, Bloomberg reported this month.
According to the report:
"Other capabilities of the device include standard Apple TV box features such as video watching and gaming, plus the use of smart speakers, such as playing music and using Apple's Siri digital assistant. launched, it would be Apple's most ambitious smart home hardware offering to date. "
For long-term investors who aim to earn decent returns through dividends and capital appreciation, Apple is also an excellent stock choice. With $ 196 billion in cash on hand, the Cupertino, California-based company is in an enviable position to further expand its share buyback program to support its stock.
Buying back your own stock would improve the value of someone's Apple assets, as there will be fewer shares outstanding and more of the profits will be shared among a smaller number of stakeholders.
Bottom Line
Expectations for a new strong beat are low with today's earnings release, with signs of slowing demand for Apple products. That said, analysts remain optimistic about the stock's long-term appeal based on its innovation capabilities, post-pandemic demand, and its robust capital repayment program.
