Apple Q1 Preview Will The IPhone 12 Deliver For Apple Stock

Apple (NASDAQ:AAPL) is slated to publish its Q1 FY’21 earnings on January 27, reporting on a quarter that saw the launch of its much anticipated 5G iPhone 12. We expect Revenues to come in at about $100 billion for the quarter, growing by about 9% versus last year, with EPS likely to grow by about 7% to around $1. 35 per share. Our estimates are marginally below the consensus. So what are the key trends that are likely to drive earnings? Firstly, Revenues should see a bump driven by strong demand for the 5G iPhones, which saw multiple models remain back-ordered through the holidays. Apple should also see higher average selling prices for the iconic smartphone, as it raised base pricing on the iPhone 12 versus the iPhone 11, while nudging customers toward the more premium iPhone Pro models (priced at $1, 000 and up), which appear to be a better value compared to last year. Apple’s Services business is also likely to have had its strongest quarter yet, driven by the App Store. In fact, Apple provided a data point indicating that between Christmas Eve and New Year’s Eve, a total of $1. 8 billion was spent on apps, up 27% versus last year. [1] App sales growth over the same period last year was about 16%. That said, Apple’s margins could see some pressure, as the new iPhones are likely to be more expensive to produce compared to last year as 5G components are pricier. Apple stock has rallied by about 65% over the last 12 months, driven largely by anticipation surrounding the 5G iPhones. Apple stock now trades at 33x projected EPS, making it look pricey compared to historical levels. The Q1 FY’21 earnings should give investors a good sense of how the device is faring and could be key to Apple’s stock trajectory in the near-term. See our pre-earnings analysis Apple Earnings Preview: Will Apple Beat Expectations? for more details on Apple’s recent performance and what’s driving its valuation.[12/9/2020] Apple’s Services Will Overtake The iPhone By 2024Apple’s (NASDAQ:AAPL) Services business is likely to emerge as its most profitable (and valuable) business within the next four years, likely eclipsing even the iPhone – which is seen as one of the most lucrative consumer products of all time. Here’s how we expect this to play out. We expect Services sales to grow at a rate of about 11% a year (down from a rate of 22% each year over the last 4 years) to $81. 5 billion in FY’24, driven by the continued growth of the AppStore and subscription services. On the other hand, we expect iPhone Revenues to grow at an average rate of about 5% each year over the next four years to about $167 billion (iPhone Revenue remained almost flat between 2016 and 2020). Now Apple’s services have much thicker margins compared to hardware products. Over FY’20, Apple’s product Gross Margins stood at 31. 5% versus about 66% for Services.


All data is taken from the source: http://forbes.com
Article Link: https://www.forbes.com/sites/greatspeculations/2021/01/26/apple-q1-preview-will-the-iphone-12-deliver-for-apple-stock/


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