Apple Stock: What Analysts Are Saying Ahead Of Earnings

Daniel Martins

Apple’s earnings day is just around the corner!

As expected, the 20-plus Wall Street analysts that cover this stock have started to issue their earnings previews. Today, we look at what some of the most active sell-side experts have been saying about the Cupertino company’s fiscal fourth quarter.

Before moving on, keep in mind that the Apple Maven will cover Apple’s results and earnings call live on Thursday, starting at 4 p.m. EST (1 p.m. PST). Tune in to the live blog by visiting thestreet.com/apple .

What Apple’s analysts are saying

Let’s start with a bird’s eye view. Since the end of September, when I looked at revenue and earnings estimates for the first time, expectations have improved slightly.

Now, Wall Street projects sales to grow by 0.2%, rather than drop 0.3%. Earnings per share are forecasted to land at $0.71, a penny higher than late last month’s consensus. The estimate range, however, remains high. See table below.

When it comes to the narrative, sell-side analysts seem split between optimism and pessimism. Let’s look at both sides of the argument, one at a time.

Bulls say

RBC Capital’s Robert Muller seems optimistic about the 5G upgrade cycle. He says that “the trend of owning phones for longer periods may be reversing”, according to a survey conducted by his firm.

To be fair, upside to sales from the new iPhone 12 will not be reflected in Apple’s fiscal fourth quarter financial results. But the new product could impact expectations for the holiday quarter.

Also optimistic is Citigroup’s Jim Suva. He expects “management to highlight Apple's multiple and diverse product revenue streams and showcase the company's installed base and subscriber monetization efforts”.

The analyst also sees an attractively priced iPhone 12 lineup that will be supported by carrier promotions in the holiday quarter.

I agree with Jim Suva’s views. Fiscal fourth quarter will likely be about the ecosystem again, with mature product categories and other devices that are not always top of mind for investors helping to support financial performance. The iPhone will be a fiscal 2021 story, one that is shaping up to be positive.

Bears say

But not all is expected to be good news. Some analysts, even those who have a buy rating on the stock, have offered words of caution about Apple’s most recent quarter.

Loop Capital’s Ananda Baruah is one of the most pessimistic. He sees risk in iPhone sales, although he remains positive about the stay-at-home segments: iPad and Mac. The analyst lowered his price target by $20 to $115 per share, which suggests 9% downside potential to owning the stock.

Even bull Katy Huberty, from Morgan Stanley, warns that “consensus estimate is too high”. She claims that the lack of a new iPhone in fiscal fourth quarter should result in smartphone revenues of $22.9 billion trailing the average estimate of $28.5 billion.

I agree with the view that smartphones will take a backseat during Apple’s fiscal fourth quarter. Any boost to financial performance will likely come from tablets, laptops and desktops, which was also the case in fiscal third quarter.

The lingering question, one that investors will be curious to learn more about, is how the iPhone will perform in the holiday season. But in that regard, Deutsche Bank’s Jeriel Ong doubts that much will be revealed this week.

With only one week of iPhone 12 sales as reference, he believes that Apple will skip guidance for the upcoming quarter once again. I suspect that Jeriel Ong is right about it.

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(Disclaimers: the author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)

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