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Apple CEO Tim Cook reveals the new iPhone 12.
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Apple is ready to report its fiscal fourth quarter earnings after the bell on Thursday.
Here’s what Wall Street is expecting, based on Refinitiv’s consensus estimates:
- EPS: $ 0.70
- Income: $ 63.7 billion
- IPhone income: $ 27.93 billion
- Service revenues: $ 14.08 billion
- Income from other products: $ 7.40 billion
- Mac income: $ 7.93 billion
- IPad revenue: $ 6.12 billion
- Gross margin: 38.1%
Investors will be looking to see if Apple offers guidance or a forecast for its first quarter of fiscal 2021, which ends in December.
With Apple’s fourth quarter ending in September and the new phones only went on sale this month, any forecast would be Apple’s first clue as to how strong it expects iPhone 12 sales to be.
Apple suspended its traditional guidance in February due to uncertainty created by the Covid-19 pandemic and has not issued a forecast in the two quarters since then.
“With only one week of new iPhone sales by the time earnings are reported on 10/29, we are not sure AAPL will be comfortable with the guidance,” Deutsche Bank analyst Jeriel Ong noted this week.
The ongoing pandemic did not prevent Apple from reporting extraordinary earnings for the quarter ending June, which beat analyst estimates and included double-digit growth in the company’s product and service segments.
In particular, iPad and Mac sales were significantly higher than Wall Street expected, which Apple attributed to strong work-from-home trends. Investors will look for data points from Apple CEO Tim Cook and Apple CFO Luca Maestri on whether Apple sees that trend continuing and whether it will boost recently announced products such as the $ 599 iPad Air that went on sale. sale this month.
“Relative to the short term, we anticipate a limited short-term rise in iPhone volume estimates, but would not rule out a rise in the next quarter due to sustained tailwinds from the work-from-home / e-learning trends, as well as portable device sales, “JPM analyst Samik Chatterjee wrote last month.
Some weeks of Apple Watch Series 6 sales will also be included in Apple’s fourth quarter earnings. Apple introduced its new line of Apple watches in September.
Investors are always paying close attention to Apple’s service business. Apple promised in 2017 to double annual service revenue by 2020 and said it reached its goal earlier this year.
The expansion of Apple’s services business is one of the main reasons Apple shares have risen this year because it makes the iPhone maker look more like a software company, which generally has higher multiples than manufacturers. hardware.
But Apple’s services business has also faced regulatory scrutiny in recent months and investors are looking for signs that it will continue to expand after years of strong growth. In July, Cook testified before the House of Representatives judicial subcommittee on antitrust about his business practices around the 30% fee he charges for apps and in-app purchases sold on the iPhone app store. .
More recently, a Justice Department lawsuit highlighted a trade deal in which Apple sells Google the privilege of being the default search engine in the iPhone browser, which it estimates is worth up to $ 12 billion per year. Apple calls this license revenue, and now it’s under threat as attorneys general across the country call the deal anti-competitive.
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