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Apple Hovers Near Record High Ahead of Earnings; iPhone Sales in Focus

Solid iPhone sales, boosted by 5G promotion at Verizon and AT&T, bode well for Apple's June quarter earnings.

Apple  (AAPL) - Get Apple Inc. (AAPL) Report shares edged higher Tuesday ahead of its highly-anticipated third quarter earnings report that could push the value of world's biggest tech company to a fresh all-time high. 

Apple is likely to post June quarter revenues of $73.3 billion, according to forecasts compiled by Refinitiv, with just over a third of that tally -- $26.4 billion -- coming from iPhone sales. Stronger-than-expected second quarter earnings from both Verizon  (VZ) - Get Verizon Communications Inc. Report and AT&T  (T) - Get AT&T Inc. Report, thanks in part to 5G promotions that pushed handset sales, auger well for Apple's June results. 

"Apple is well-positioned to continue to benefit from the 5G upgrade cycle, and we anticipate strong overall growth trends as 5G smartphones ramp and its installed base expands with higher-margins services revenue," said Canaccord Genuity analyst T. Michael Walkley, who carries a buy rating with a $175 price target on the stock. 

"With the 5G upgrade cycle likely a benefit through at least C2022, other hardware categories growing double-digits, and continued mix shift toward high-margin services, we believe the share price remains compelling for longer-term investors," he added.

Apple shares were marked 0.15% lower in early Tuesday trading at $148.58 each. The stock traded at an all-time intra-day high of $150.00 each on July 15

Services revenues, a central plank in Apple's recent growth narrative, could rise 20% to $15.8 billion, according to Street forecasts, on the strength of an installed base of devices that sits at 1.65 billion.

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Work-from-home demand, as well as back-to-school and enterprise sales, could lift Mac revenues by 28.5% to $9.1 billion, while the iPad topline is forecast to come in at $7.15 billion. 

China revenues could be a weak spot in the earnings report, however, with government-supplied sales data pointing to a 27% year-on-year decline in handset shipments. Apple notched $9.33 billion in China revenues last year, around 15% of its overall total. 

And finally, September quarter guidance, heading into Apple's hotly-anticipated iPhone 13 launch in the fall, will be closely-tracked by investors given the stock's historic post-earnings outperformance. 

"While share price performance post earnings may be more muted given Apple's recent outperformance, we are buyers heading into the iPhone 13 launch in September," Morgan Stanley analyst Kathy Huberty said in a recent client note that included an improved price target of $166 per share. 

"We see the combination of mature replacement cycles, increasing 5G adoption, improving retail store traffic, longer battery life and camera quality, and share gains against Huawei as drivers of iPhone outperformance relative to past cycles," she added.

Huberty has June quarter revenues for Apple pegged at $74.7 billion, around 2% ahead of consensus, and September quarter earnings at $83.2 billion. 

Earlier this month, JPMorgan's Samik Chatterjee added Apple to his 'analyst focus list', and boosted his price target by $5 to $175 each, citing "a path to outperforming investor expectations over a longer time horizon rather than just the upcoming earnings print."