Apple (AAPL) is scheduled to report results for the company's first quarter of fiscal year 2021 after the market close on Wednesday, January 27, with a conference call scheduled for 5:00 pm ET. What to watch for:
1. ANALYSTS BULLISH: Last quarter, Apple beat consensus earnings and revenue expectations but the stock fell 5.6% the next trading day. Since then, however, Apple's stock has risen as analysts have been getting more bullish on iPhone sales, the impact of the current work-and-play-from-home environment on its other hardware products as well as its services growth.
With the company's last report, CEO Tim Cook said Apple "is in the midst of our most prolific product introduction period ever, and the early response to all our new products, led by our first 5G-enabled iPhone lineup, has been tremendously positive."
Following that last report, Piper Sandler analyst Harsh Kumar said he came away "extremely bullish." Apple set records in every category except the iPhone during the September quarter, Kumar told investors at that time.
More recently, Morgan Stanley analyst Katy Huberty raised the firm's price target on Apple to $152 from $144 and kept an Overweight rating on the shares ahead of what she expects will likely be a "record quarter." While her recent conversations suggest investors expect Apple to release "solid, but not great" December quarter results, she believes Apple is likely to report all-time record quarterly revenue and earnings given her checks pointing to strength across the company's entire Product and Services portfolio, Huberty said. Her fiscal first quarter revenue estimate is $108.2B, the analyst noted.
Current consensus EPS and revenue forecasts for Apple's December quarter stand at $1.41 and $103.28B, respectively, according to data provided by Refinitiv.
Analysts expect Apple to have shipped 74.3M iPhones in Q1 and to report iPhone revenue of $60.3B, up from $56.0B in the same quarter of last year, according to data compiled by Bloomberg.
2. EVEN BEARISH GOLDMAN SEES NEAR-TERM STRENGTH: On January 15, Goldman Sachs analyst Rod Hall repeated his Sell rating on Apple with an $80 price target, but raised his short-term forecasts as he expects the company to "report and guide well" for Q1 and Q2 given solid consumer demand indications combined with likely strong continued work-from-home and school-from-home related Mac and iPad demand. Hall, who said that the firm's checks indicate Apple has already begun cutting iPhone orders and suggest a tilt toward lower average selling price models in the most recent first half of 2021 build order revisions, said such changes are consistent with "a normal iPhone redesign cycle but are not consistent with a Super Cycle."
3. NEW PRODUCTS AND SERVICES: Earlier this month, Spotify (SPOT) shares plunged after reports surfaced that Apple may be set to challenge the company with its own podcast subscription service. According to The Information's Tom Dotan and Jessica Toonkel, Apple is considering a new subscription service to charge people to listen to podcasts. Such a service from Apple could pose a threat notably to Spotify, which has been investing in podcasts heavily, but also to SiriusXM (SIRI) and Amazon (AMZN), the report noted.
Also this month, Bloomberg's Mark Gurman reported that Apple has begun early work on an iPhone with a foldable screen, a potential rival to similar devices from Samsung (SSNLF) and others, though it's planning only minor changes for this year's iPhone line. The company has developed prototype foldable screens for internal testing, but hasn't solidified plans to actually launch a foldable iPhone, the author noted. The development work hasn't expanded beyond a display, meaning Apple doesn't yet have full handset prototypes in its labs, according to Gurman, citing a person familiar with the work.
On January 21, Bloomberg's Gurman reported that Apple's first headset will focus on virtual reality, include powerful processors, and be designed as a niche precursor to eventual augmented reality glasses. According to people familiar with the matter, Apple has planned to launch the product as soon as 2022, competing against Facebook's (FB) Oculus, Sony's (SNE) PlayStation VR and headsets from HTC (HTCKF), though plans suggest Apple's headset will be more expensive than those from rivals, which cost about $300-$900.
4. CAR PROSPECTS: Earlier this month, Hyundai Motor (HYMTF) confirmed early stage talks with Apple about building an electric vehicle, The Financial Times' Song Jung-a, Edward White and Patrick McGee reported. "Apple and Hyundai are in discussions, but as it is at an early stage, nothing has been decided," Hyundai told the publication, adding that Apple is speaking with "a variety of global carmakers." Reports have swirled that Apple plans to launch an electric vehicle and is teaming up to develop the car and its own EV batteries.
In a note to investors this week, Credit Suisse analyst Dan Levy said that while he still doesn't know what an end product in the auto market for Apple will ultimately be, he would argue core principles in any offering will be "design theory"/human-centric design, as well as a desire to solve user pain points with an end-to-end solution. Areas where Apple could differentiate versus the current vehicle experience are in software, and also in enhancing the battery, Levy added. At the same time, the analyst believes a potential partnership with Hyundai is important as Hyundai and its suppliers provide Apple with the ability to meet challenging requirements for automotive applications.
The previous day, Evercore ISI analyst Amit Daryanani raised the firm's price target on Apple to $160 from $145 and kept an Outperform rating on the shares, stating that his near-term "bullish bias" is driven by expectations for an iPhone supercycle, the monetization of its installed base and gross margin expansion. Daryanani also noted that recent discussions around Apple Car "have become louder" and the analyst sees increased odds that Apple will have a product in the automotive space in the next five years, adding that the auto market will be a driver for multiple expansion given the potential for Apple to "disrupt the Automotive market much as it did the phone industry."
