Apple Reports Earnings on Thursday: 6 Important Things to Watch

Keep an eye on iPhone and wearables growth rates, as well as any comments shared about services businesses or stock buyback plans.
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Near-term sales expectations for Apple  (AAPL) - Get Report are fairly subdued going into Thursday’s earnings report.

Currently, the consensus among analysts polled by FactSet is for Apple to post March quarter (fiscal second quarter) revenue of $54.78 billion (down 6% annually) and GAAP EPS of $2.29. For the June quarter -- Apple typically provides quarterly sales guidance, although there’s some speculation that it won’t this time due to limited visibility -- the revenue consensus stands at $51.61 billion (down 4%).

Apple guided in January for March quarter revenue of $63 billion to $67 billion. However, the company announced on Feb. 17 that it doesn’t expect to hit this guidance due to the impact of China’s COVID-19 outbreak on iPhone supplies and Chinese demand. And since then, estimates have been further lowered to account for the impact of COVID-19 lockdowns elsewhere.

Here are a few things to watch as Apple reports on Thursday afternoon (usually, the report arrives at 4:30 P.M. ET) and hosts an earnings call at 5 P.M.

1. iPhone Sales

All signs suggest global smartphone sales are slumping right now. Among other things, carriers such as Verizon and AT&T have reported seeing major smartphone sales declines after lockdowns took effect in March, and firms such as Taiwan Semiconductor  (TSM) - Get Report and Texas Instruments  (TXN) - Get Report have shared downbeat comments about smartphone chip demand.

The consensus is for Apple’s iPhone revenue, which still accounts for over half of its total revenue, to be down 9% annually in the March quarter to $28.39 billion.

2. Mac and iPad Sales

As Intel’s  (INTC) - Get Report Q1 report drives home, notebook sales have gotten a lift as consumers and businesses make purchases to support remote work and learning activities. And some firms, including Apple chip supplier STMicroelectronics  (STM) - Get Report, have also reported seeing strong tablet demand.

As a result, there could be some upside to Mac and iPad sales estimates. The consensus is for Mac revenue to be down 5% to $5.26 billion, and for iPad revenue to be down 12% to $4.28 billion. Recent iPad Pro and MacBook Air refreshes should provide a boost to June quarter sales.

3. Wearables Sales

Thanks to strong Apple Watch and (especially) AirPods sales growth, Apple’s Wearables, Home & Accessories segment saw revenue grow 37% in the December quarter to $10.01 billion. Tim Cook added that “wearables” sales, which cover the Apple Watch, AirPods and Beats headphones, grew 44%.

Demand may have cooled some in March. Nonetheless, with AirPods demand still expected to be a major tailwind, the consensus is for Wearables, Home & Accessories revenue to be up 37% in the March quarter to $7.05 billion.

4. Services Revenue and Stats

COVID-19 lockdowns have driven major increases in digital content consumption. And that in turn is probably giving a boost to some of Apple’s services revenue streams, such as App Store transactions and Apple Music, Arcade and TV+ subscriptions.

On the flip side, Apple Pay transactions have likely taken a hit in recent weeks, and (with online ad sales slumping) the search ad revenue-sharing payments that Apple gets from Alphabet/Google  (GOOGL) - Get Report have probably dropped as well.

The consensus is for Apple’s Services segment revenue to be up 12% in the March quarter to $12.85 billion. The company usually shares some stats on its call about how individual services businesses performed.

5. Comments About Product Launch Timings

Apple tends to be pretty tight-lipped about future devices. However, with The Wall Street Journal having reported on Monday that Apple is pushing back the production ramp for its fall 2020 iPhone lineup by a month, the company could share a high-level comment or two about what impact (if any) it expects COVID-19 to have on the timing of future product rollouts.

6. Stock Buybacks

Quite a few companies have paused their stock buyback programs over the last two months. Look for Apple to disclose on Thursday whether or not it has done the same.

Apple bought back $20 billion worth of stock in its December quarter. The company’s balance sheet, cash-flow profile and credit rating give it plenty of leeway to keep repurchasing shares if it wishes.

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