Apple is expected to step into the new year and post its first-quarter revenue of $ 100 billion, a milestone for a company that first recorded that figure in a full year in 2011.
The $ 2.38 billion tech giant is expected to post $ 102.6 billion in its fourth quarter results on Wednesday, up from $ 91.8 billion a year ago, according to Visible Alpha. Net income is expected to climb 6.3% to $ 23.6 billion – the biggest quarterly profit ever for a private company.
A handful of companies, including Walmart, have already reported quarters of $ 100 billion, while Amazon is expected to break that hurdle when it reports next month. But Apple’s profit margins are projected at around 23%, or about five times those of the two retailers.
The figures are based on the assumption that iPhone sales will increase 6% from a year ago – a depressed expectation due to the several-week delay caused by the iPhone 12 coronavirus.
“The fact that they appear to be able to hit the $ 100 billion mark with slower iPhone revenue growth suggests that they have done an incredible job of diversifying their portfolio,” said Tom Forte, analyst at DA Davidson.
Apple, whose shares traded at an all-time high on Monday, had already demonstrated this ability in the fiscal year until September, when it managed to boost revenue in a dead year for the iPhone.
Over the past decade, Apple’s profits have been cyclical, mostly driven by iPhone launches, but now, thanks to its abundance of services and hardware offerings – from streaming music to AirPods – its results have smoothed out.
Last year was the first year that iPhone sales fell – from $ 142 billion in 2019 to $ 138 billion in 2020 – but overall revenues grew again. Although the devices only accounted for 50% of sales, Apple’s revenue grew by 6%.
In the last quarter, all other categories – Macs, services, wearable devices, and iPads – are expected to experience double-digit growth, in part due to additional demand for Apple products as consumers modernize their home offices during the last quarter. the pandemic.
Amit Daryanani, analyst at Evercore ISI, is among those who believe Apple will be down due to supply constraints, however. It projects $ 94 billion in revenue.
“But it’s a reflection of the supply they have – not the demand,” he said. “The demand is much higher than the supply.”
He’s otherwise bullish and believes Apple shares could climb to $ 200 this year, turning it into a $ 3 billion company.
Part of Mr. Daryanani’s optimism stems from how Apple is expected to take advantage of two macro trends. A weakened US dollar is expected to contribute significantly, as three-fifths of Apple’s revenue comes from outside the US, while falling commodity prices are expected to translate into lower input costs.
“Currencies have always been a big drag for Apple, but that’s once should be a positive wind,” Mr. Daryanani said. “And this is the first time we’ve seen a drop in component costs, which could be another compelling benefit from an earnings per share or free cash flow perspective.”
A possible headwind this year is a higher corporate tax rate from the Biden administration. Another is antitrust, as Apple is criticized for the way it treats developers who create apps for the iPhone. A third risk is that consumers will switch to cheaper iPhones over more expensive 5G models, as the need for a high-speed internet connection could be reduced if consumers spend more time at home using WiFi.
The first two risks aren’t immediate, however, and early signals point to high-end 5G Pro and Pro Max iPhones seeing “notable adoption,” according to Bernstein analyst Toni Sacconaghi.
He predicts that the average iPhone selling price in the last quarter will rise 7% to $ 817, and iPhone unit sales will rise 8% to 79 million. Together, these trends suggest that iPhone revenue will rise nearly 16% to $ 64.8 billion, pushing December revenue to over $ 108 billion.
Whether iPhone sales come out stronger in the December quarter or the current quarter, it’s increasingly difficult to see how Apple could stumble this year.
Even bearish analysts at Goldman Sachs – whose share price target of $ 85 is 38% lower than Apple’s is trading today – expect the company to release revenue guidance above the consensus of $ 105.3 billion, as all indications suggest Christmas demand was strong.
Goldman points out that revenues of TSMC, which produces chips for Apple, rose 14% year-on-year in the December quarter, while Foxconn – Apple’s main assembly partner – posted a gain of 15%. % higher than expected.
Among the most bullish analysts, Morgan Stanley’s Katy Huberty expects Apple’s revenue to grow 21.8% this year to a record $ 334 billion, thanks to increased iPhone sales of 26.7% and double digit growth in all other categories.
His optimism reflects the fact that if Apple overcomes its supply challenges, 2021 is expected to be the first year that its burgeoning hardware and service businesses will feel the added benefit of a successful iPhone launch – as the 5G-enabled iPhone is Apple’s most important product since the iPhone 6 was released in 2014.
“We haven’t seen this combination in that order of magnitude yet,” added Forte. “It’s like in Star wars – we are about to see the full operational power of the Death Star.