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- Apple is set to report fiscal fourth-quarter results on Thursday, cluing investors in on how the company performed just before its latest iPhone event.
- In the quarter that ended in September, Apple introduced services and updated its watch and iPad lineups.
- The reveal of its first 5G-capable iPhone lineup arrived later than usual, and while iPhone 12 sales won’t show up in Thursday’s report, investors and analysts will closely monitor commentary on iPhone demand.
- Here’s what four major banks expect from Apple’s fiscal fourth-quarter earnings.
- Watch Apple trade live here.
Apple is set to report fiscal fourth-quarter earnings on Thursday afternoon, but it’s current-quarter commentary that Wall Street is likely to watch closely.
In the three-month period that ended in September, the tech titan unveiled services, updated watches, and introduced a new iPad lineup. Most analysts expect Apple’s prior-quarter results to land largely in line with estimates, with little hope of a rally from its already lofty valuation.
Instead, all eyes will be on the company’s guidance and earnings call. Apple rolled out its first 5G-capable iPhone lineup earlier in October, in one of its latest fall iPhone reveals. Sales of the new handsets won’t show up in Thursday’s report, but with Wall Street holding high expectations for the iPhone 12, any commentary on sales momentum will be closely monitored.
Here’s what four major banks expect from Apple’s fiscal fourth-quarter report, from iPhone-demand commentary to steady Services growth.
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UBS: ‘Shares are likely to remain range-bound’
Analysts led by David Vogt expect Apple’s report to contain few fourth-quarter surprises. The tech giant’s revenue and profit should land slightly above estimates, and its share price has already priced in such on-par performance, UBS said.
Moreover, history suggests a rosy earnings report will still give way to mediocre near-term performance. The company’s fiscal third-quarter results typically coincide with the unveiling of new iPhones. Investors tend to anticipate the product launch and drive shares higher in the three months before September earnings. But in the following three months shares underperform the S&P 500 by 3% on average, the analysts said.
Coupled with Apple’s already lofty valuation, an earnings beat is unlikely to buck precedent and pull shares much higher, UBS said.
“We believe the shares are likely to remain range-bound until investors gain clarity on the initial success of the iPhone 12 launch,” the team said, adding that investors would reserve judgment on the new phones’ success until Apple reports current-quarter earnings.
UBS maintained a “neutral” rating on Apple shares, with a price target of $115.
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Wedbush: Demand commentary is ‘the main event’
Improving its Services revenue should help Apple post a modest earnings beat on Thursday, but iPhone demand will take center stage, the Wedbush analyst Dan Ives said. Apple’s analyst call will yield the most important news for those closely watching the stock, he said.
“For investors, the September quarter takes a back seat to the main event which is around gauging the demand growth trajectory for iPhone 12 into the holiday quarter and the rest of 2021,” Ives wrote in a Monday note.
The analyst has long looked forward to the latest iPhone release, saying the roughly 350 million iPhone users eligible for upgrades set Apple up for a “once in a decade” launch. Ives said he expected roughly 80 million iPhones to have been sold during the initial launch period. Should the estimate prove right, the latest iPhone rollout could be the best since the iPhone 6 release in 2014, the analyst added.
Any commentary on demand in China will also play a major role in the stock price’s trajectory, Ives said. The country is a “key ingredient” of Apple’s success, and signs of weakness could stifle iPhone optimism elsewhere.
Wedbush held an “outperform” rating on Apple shares, with a price target of $150.
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Credit Suisse: ‘Valuation leaves little room for error’
Analysts led by Matthew Cabral similarly advised investors to look through fiscal fourth-quarter figures for insight into Apple’s 5G iPhone sales. Some were delayed by about one month, while other models aren’t set to be released until November.
That timing will skew Apple’s usual seasonality, Credit Suisse said in a Monday note. Revenue should land modestly below fiscal fourth-quarter estimates and, in turn, lead the current quarter to play a larger role in Apple’s full-year results.
Supply-chain data and order wait times suggest the iPhone launch is off to a good start, but the team remained guarded about whether earnings would lift shares much higher. Limited 5G coverage around the world and the lack of a “robust 5G app ecosystem” may keep some users from upgrading to the new generation, the analysts said.
With shares trading at a 38% premium to the S&P 500 when the note was published, “valuation leaves little room for error” when earnings are reported, the team added.
Credit Suisse held a “neutral” rating on Apple shares, with a price target of $106.
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RBC expects Apple to report earnings and revenue only slightly below consensus estimates. And like most other banks, it is more interested in executive commentary on the iPhone 12’s sales.
Market-share data cited in the bank’s Monday note indicated that Apple’s dominance gained 3.3 percentage points from the year-ago period. The boost was likely fueled by the company’s lower-cost iPhone SE and may allay concerns of weakness in the recent quarter, according to the bank.
“While we expect SE performance should help bridge the gap between the last 4G lineup and the new 5G cycle launched this month, we expect comments on the new product launch to be the key focus area,” the team led by Robert Muller said.
The SE bridge should give way to strong iPhone sales in Apple’s first fiscal quarter of 2021. The bank said its Apple survey suggested that reception of the new phones was so far encouraging.
Additionally, 36% of customers were on Apple’s annual upgrade program, and another 25% said they planned to join. The data signals that Apple could shrink iPhone holding times soon, the analysts said.
RBC maintained an “outperform” rating for Apple shares, with a price target of $132.
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