Apple Q3 Profit Preview: The 70% rally of shares will undergo a reality check

Reports the third quarter 2020 results on Thursday, July 30 after closing
Revenue forecast: $ 51.77 billion
EPS expectation: $ 2.02

When Apple (NASDAQ 🙂 reports its third quarter 2020 fiscal profit later today, investors will want to justify the 70% increase in the company's stock since the dip in March. The speed and size of this rebound suggests that the iPhone maker has a solid case to satisfy bulls.

The Cupertino, California-based company is well positioned to weather the pandemic downturn, aided by its services business, wearable products and its share buyback program.

While iPhone sales became a hit when 450 of Apple's stores were forced to close worldwide during lockdowns, services and wearables proved to make a difference to operating results.

These divisions, including App Store sales and AirPods wireless earbuds, grew 18% to $ 19.63 billion in the US. Meanwhile, sales of legacy products – the iPhone, iPad, and Mac – fell by nearly 7%.

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 technology hardware and software to drive sales once the pandemic is under control.

New Design and Services

Last month, Apple introduced a range of software additions to its gadget family, including the most significant changes to the iPhone home screen since the product's release. in 2007. Users will be able to add widgets that sit between the typical grid of apps, which can be set to different sizes and current information, such as the weather or a calendar, which is updated throughout the day. The Apple Watch comes with tools for sleep tracking and hand wash detection.

One of the most exciting changes was Apple's decision to sell Mac computers using internally designed processors, replacing Intel (NASDAQ 🙂 chips. The first Macs with Apple's own chips will be available by the end of this year.

For users, this means that future Mac devices will be much more like the iPhone or iPad. The battery life should be longer and the performance better. In addition, the new Mac iteration will have the ability to run native iPhone and iPad apps.

With future innovation in mind, investors are likely to ignore potential weaknesses in the sales of iPhones and the Apple Watch due to closings and temporary store closings.

The company also predicts that sales of its Internet services, as well as Mac computers and iPads, are likely to have increased, as more people will remain largely at home.

Still, it would be prudent for investors not to ignore potential risks that could stunt Apple's growth in the short term, especially when the global economy remains in recession and the COVID-19 pandemic continues to rage.

Keep an eye out for users who hang on their phones for longer, or keep upgrading, even in difficult economic conditions. Also note that Apple did not provide guidance during the announcement of its second quarter earnings in April, the first time in more than a decade this has happened due to the ongoing disruptions to the pandemic.

Bottom Line

Chances are Apple's third-quarter earnings report would disappoint Apple bulls due to headwinds in today's uncertain economic environment. But any dip in Apple stock should be considered a buying opportunity in our opinion, given the company's strong global brand, cash position, and commitment to diversifying its income stream.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.