Reports Q4 2020 results on Thursday, October 29, after the close
Expected Revenue: $ 63.98 Billion
EPS expectation: $ 0.71
When Apple (NASDAQ 🙂 reports its fourth quarter 2020 fiscal results later in the day, investors will be eager to understand the demand pattern for the company's latest gadgets, including the phones that are powered on.
The California-based company unveiled four different iPhone models earlier this month in an effort to break a slow growth cycle for its flagship product. All new iPhone models run on a new wireless standard known as 5G which can transmit data as much as 10 times faster than current 4G LTE technology.
The iPhone 12 offered a new look, with a flatter appearance reminiscent of the iPhone 4. Prices for the new phones were roughly on par with last year, although the 12 Mini is the least expensive new version.
Apple is betting that new iPhone models will revive growth in the most profitable segment after unit sales peaked three years ago. However, the outlook for the iPhone business became more uncertain during the pandemic, as millions of people lost their jobs, making it difficult for them to buy more expensive newer models.
Many analysts believe that Apple & # 39; s latest models, competitive pricing and the promise of faster speed could entice the company's loyal users to upgrade their handsets and create a new & # 39; super cycle & # 39 ; for this segment.
Diversification pays off
Despite pandemic headwinds, some analysts continue to insist on Apple's earnings growth, advising investors to buy shares even after a 60% jump this year. Analysts at JPMorgan believe the iPhone maker's stock is a good bet, given a combination of positive factors at play.
In a recent note, the bank cited strong demand for both older and new 5G iPhones, its leading wearables innovation, and a robust and resilient service portfolio as factors supporting earnings growth and inventory.
Even if Apple fails to generate enough momentum for its new models amid a pandemic and global recession, the company's diversification strategy away from the hardware is working fine and provides good reason to remain enthusiastic .
Apple's CEO Tim Cook has been using the company's massive ecosystem quite successfully to further monetize services such as the App Store, music streaming and wearables, including the Apple Watch.
As sales of the iPhone business stagnate, the company is witnessing robustness in these new areas. In the past fiscal year, the wearables category grew 40%, while service revenues grew 16.4%.
And there is no reason to believe that this rate of expansion will slow down anytime soon, especially when people are trapped in their homes and avoid physical entertainment venues. To take advantage of this opportunity, Apple last month unveiled a & # 39; Apple One & # 39; subscription bundle that combines several services – including Apple Music, Apple TV + and iCloud storage – at a lower price than their individual packages. .
Bottom Line
Apple remains an attractive stock to buy, even after rallying at 60% this year. The company's innovation machine, growing service segment and wearable devices provide good reason to remain optimistic about this stock. Even without another super sales cycle for iPhones in the current quarter, Apple is on track to monetize its massive install base. Any post-win weakness should be considered a buying opportunity in our opinion.
