If there were any doubts about Apple’s (AAPL) urgency to transition the company’s devices towards Arm-powered chips, these doubts were erased last week at the company’s Spring launch event. But there are other questions the market wants answers for, including the company’s reported ambitions in the electric vehicle market. Investors might not have to wait long.
Apple will report second quarter fiscal 2021 earnings results after the closing bell Wednesday. At last week’s Spring launch event, the tech giant announced new iMac and iPad Pro devices that will be powered by the company's self-designed M1 chip, suggesting the speed and pace of the technical transition to its self-designed chip within all of the company’s major computing devices will quick. In other words, Apple is no longer just an iPhone company.
The company also unveiled long-anticipated AirTags location finders in addition to a Podcast subscription service and a the new 4K Apple TV. Investors will focus on the company’s guidance for any clues about how these new devices will perform in the quarters ahead. Meanwhile, Apple’s Services business, which now accounts for almost 25% of total revenue, surged last quarter to a record $15.7 billion, topping consensus of $14.12 billion. Investors and analysts will want to know if these strong trends can continue.
The rumored electric vehicle, dubbed Apple Car, will also be an area of focus. Investors will want to know whether it is realistic or just hype. Reports suggests Apple can begin production of the vehicle as early as 2024. Meanwhile, UBS analyst David Vogt believes Apple Car can justify an additional $14 per share valuation to Apple’s price target. To be sure, Apple hasn’t confirmed the company’s car ambitions. Yet, UBS forecasts the Apple Car to be worth an additional $235 billion valuation to the stock. It will certainly make a great topic of discussion on Wednesday earnings call.
In the three months that ended March, Wall Street expect the Cupertino, Calif.-based tech giant to earn 98 cents per share on revenue of $77.1 billion. This compares to the year-ago quarter when earnings came to 64 cents per share on revenue of $58.31 billion. For the full year, ending August, earnings are expected to rise 36% year over year to $4.46 per share, while full-year revenue of $333.97 billion will rise 21.7% year over year.
It will be a while before the aforementioned products, including the car and those revealed during the Spring launch event, make a dent on the revenue line. Until then, Apple’s iPhone sales will remain the company’s bread-and-butter revenue generator. That’s not a bad problem to have, given strong demand for the 5G-enabled iPhone 12, which despite being launched slightly later than usual due to the pandemic, has been a huge success by all metrics, beating Street iPhone sales sales estimate by about $4 billion.
In Q1, delivered revenues of more than $111.4 billion and earnings per share of $1.68, beating on both metrics, thanks to double-digit year-over-year revenue increases in each revenue category. Apple also expanded its profit margins which drove more than $28.75 billion in net income, erasing concerns that the 5G iPhones would yield high production costs. That was not the case. Remote-work and remote-learning tailwind also boosted sales in MacBooks, iMacs and iPads.
Assuming these strong trends remain positive, Apple stock — which currently trades at only seven time forward 12-month sales — will continue to rise.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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