Apple Inc shares have marched higher for months on increasingly bullish expectations for new iPhones, surging AirPods demand and a growing slate of digital services.
That rally will be tested yesterday by quarterly results from the tech giant, a new forecast and the looming risk of the deadly coronavirus in China.
Wall Street is looking for the best revenue growth in five quarters, thanks to strong holiday sales.
That’s already sparked stock gains that added more than $250bn to Apple’s market value since late October.
And yet, several analysts think results, and a forecast for the current quarter, will beat expectations and keep the shares climbing.
“Investors expect strong results,” Morgan Stanley analyst Katy Huberty wrote in a recent research note. “Whispers,” or unofficial forecasts, are calling for a “slight beat,” she added.
“Apple’s stock could continue to grind up,” Sanford C Bernstein analyst Toni Sacconaghi told investors on Friday.
After suffering its first annual revenue decline in three years in fiscal 2019, Apple is seen returning to growth when it reports after the market closes.
Fiscal first-quarter revenue will be $88.4bn, up 5% from a year earlier, according to analyst forecast data compiled by Bloomberg.
Wall Street is looking for earnings of $4.56 a share, up 9% from the 2018 holiday quarter.
iPhone sales have recovered as a result of price reductions that lured buyers, a rush to upgrade ageing handsets and solid demand in China. Analysts are particularly excited about accessories, such as the Apple Watch and AirPods, and the potential of Apple’s digital services.
Revenue from the iPhone is projected to be $51.5bn, according to Bloomberg Consensus estimates.
That would be a decline of roughly 1% year-over year.
However, it would mark a major improvement from the 2018 holiday quarter, when iPhone revenue fell 15%. Growth elsewhere should pick up the slack.
Services revenue is expected to jump 19% to $13bn, while Bernstein expects AirPods sales to more than double to at least $3.5bn.
As iPhone growth has slowed in recent years, Apple’s strategy has evolved and Wall Street has embraced the shift so far.
The company aims to sell new handsets to customers every three to five years, and then offer as many services and accessories as possible in the intervening years.
Investors will be listening for any comments from chief executive officer Tim Cook on this transition, and any similar moves, such as subscriptions that bundle hardware and services together.
Apple will also forecast sales in the current period yesterday.
Fiscal second-quarter revenue is projected to come in at $62.3bn.
Bernstein’s Sacconaghi is looking for revenue of $63bn to $65bn, driven by AirPods sales and the possible launch of a cheaper iPhone in March.
Investors are also expecting new iPhones in the fall that work with 5G wireless networks, the analyst said.
All this optimism has pushed Apple’s stock valuation to the highest level in at least a decade, raising the bar for the results.
Wall Street is also sanguine about the impact of the coronavirus outbreak on Apple – at least for now.
While the threat of the disease is “scary,” the effect on Apple’s business should be “negligible,” according to Wedbush Securities analyst Daniel Ives.
Travel restrictions and less foot traffic in China could result in 1mn lost iPhone sales in the current quarter, or less than 3% of annual projections – and those sales will still happen later in the year, Ives estimated in a note to investors on Monday.
Still, there are risks for Apple. The US State Department said on Monday that citizens should reconsider travel to China.
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