A ‘drop the mic’ quarter: 3 Apple stock analysts explain why they’re boosting price targets after a monster 2nd-quarter earnings report

iphone 12
  • Apple turned in earnings and revenue for its financial second quarter that surged past Wall Street’s expectations
  • Goldman Sachs upgraded Apple shares to neutral from sell following the earnings report.
  • JP Morgan and Wedbush increased their price targets for the tech giant.
  • See more stories on Insider’s business page.

Apple’s second-quarter financial report outstripped expectations set by Wall Street, bolstered by a 66% climb in iPhone sales and the reopening of its 220 stores in the US that had been shut by the pandemic.

Quarterly revenue of $89.6 billion was higher than $77.3 billion expected in a consensus estimate from Yahoo Finance. Earnings of $1.40 per share trounced the average estimate of $0.56 per share.

“Our original view that the iPhone cycle would disappoint in the midst of COVID was clearly wrong. Not only has Apple done better than we expected on iPhone during the cycle but Mac and iPad have also materially outperformed our forecasts,” said Goldman Sachs equity analyst Rod Hall in a Thursday note in which he upgraded Apple to a neutral rating from sell. Apple’s results prompted other analysts to raise their price targets on the tech industry behemoth.

Apple shares advanced during Thursday’s session.

Here’s what three top Wall Street analysts had to say about Apple’s report.

Wedbush: “Cook & Co. Deliver a ‘Drop the Mic’ quarter

iPhone revenue beat Wedbush’s expectations by 17% “in a jaw-dropping performance as the iPhone 12 supercycle is playing out before our (and the Street’s) eyes,” wrote analyst Dan Ives.

The iPhone 12 will hand the baton to iPhone 13 in September as part of a multi-year 5G upgrade cycle, he said, adding that China remains the fuel in the iPhone 12 cycle, with no signs of slowing down based on its recent Asian supply chain checks and supported by Apple’s high-level outlook for the June quarter.

“Of course chip shortages will have a headwind for the next few quarters (roughly $3 billion to $4 billion headwind in the June quarter) for Apple like every technology/automotive player, but the reality is this product cycle is enabling Cook & Co. to achieve its next level of growth and monetization looking ahead,” wrote Ives.

Wedbush raised its price target $185 from $175, with a bull target of $225. It kept its outperform rating on the stock and said Apple remains on its “Best Ideas List” for 2021.

Goldman Sachs: Apple “materially beats in all segments”

In highlighting some of Apple’s figures, Goldman said iPhone revenue of $48 billion was 30% higher than its estimate, and continued work-from-home demand pushed Mac revenue up by 70% year over year to $9 billion, which was 2% higher than its forecast. It noted that Apple mentioned that both Macs and iPads remained supply constrained because of strong demand.

Analyst Rod Hall said since being added to Goldman’s Americas Sell List in mid-April 2020, Apple’s stock has surged 86% compared with the S&P 500’s gain of 49%.

“Our forecasts move up to match the beat and June revenue indications and are now closer to consensus. While we continue to believe current levels of demand are likely to be tough to sustain, we equally acknowledge that high-end consumers have proven far more resilient through the pandemic than we expected,” wrote Hall.

Goldman raised its 12-month price target to $130 from $83.

JP Morgan: “5G has more legs than one quarter”

Analyst Samik Chatterjee said the 5G iPhone cycle is not only spurring strong consumer upgrades and switches, it’s also positioning Apple for a higher share of the overall smartphone market. As well, Apple is likely to see further demand from customers and enterprise channels for Macs and iPads “much longer than investors presume at this time,” stemming from the changing landscape of where and how people work.

“We raise our revenue and earnings estimates for FY21 on the strength, but more importantly raise our out-year iPhone, Mac, iPad and Services revenue expectations as well, as we expect Apple to continue to build on the strength with stronger replacement cycle-led demand and greater Services opportunity on a larger installed base,” said Chatterjee.

The investment bank raised its price target to $165 from $150 and reiterated its overweight rating.

Read the original article on Business Insider

Apple reported $89.5 billion in revenue for the second quarter, smashing estimates as it continues its iPhone 12 high and stores return to normal operations

tim cook apple
Tim Cook in Cupertino in September 2019.

  • Apple kicked off 2021 with $47.9 billion in iPhone sales as the iPhone 12 lineup remains a hit.
  • iPhone production wasn’t impacted by the chip shortage, but MacBooks and iPads reportedly are.
  • All of Apple’s US stores were also open in March for the first time since last year.
  • See more stories on Insider’s business page.

Apple reported $89.5 billion in revenue during its 2021 fiscal second-quarter, which ran from January to March for the phone maker.

The company’s Q2 saw all of its stores open for the first time since the start of the pandemic. And while its iPhone production was unaffected by the sweeping global chip shortage, its MacBooks and iPad are reportedly postponed due to the semiconductor crisis.

Here’s a look at the key numbers. Analyst estimates are based on Yahoo Finance data.

Here are the key numbers to watch from Apple’s Q2 earnings:

  • Q2 2021 revenue: $89.5 billion. Analysts were expecting $77.3 billion.
  • Q2 2021 earnings per share (EPS): $1.40, versus Wall Street estimates of $0.56.
  • iPhone revenue: $47.94 billion. Analysts were expecting $41.49 billion.
  • Services Revenue: $16.9 billion, versus analyst estimates of $15.65 billion.
  • Wearables Revenue: $7.8 billion versus analysts’ estimates of $7.52 billion.

Apple’s fiscal second-quarter revenue is a dip from what was a record-breaking Q1 for the company when it reported more than $100 billion in sales, a first for the tech giant. The boom was in part driven by the holiday season and the company’s iPhone 12 line release in October. Some analysts called the lineup one of the most important launches that Apple has made in years.

Wall Street expects the company to deliver about 220 million iPhone units throughout 2021. iPhone production isn’t expected to be impacted by a global chip shortage that is slamming every industry. However, the production of some of Apple’s MacBooks and iPad has been delayed since the company pushed back some component orders for the devices to the back half of this year due to the shortage.

All of Apple’s 270 US stores were opened in March, marking the first time that the company’s retail presence in its entirety was open to customers since the start of the pandemic. However, stores will continue to observe limited capacity and other safety protocols.

Read more: The battle between Facebook and Apple over privacy is about more than just ads – it’s about the future of how we interact with tech

Apple faced mounting pressure in its fiscal second-quarter over a privacy crackdown that has begun rolling out. The iOS 14.5 software update, which became available Monday, requires app developers to ask for permission before they collect and track users’ data.

Facebook specifically has taken issue with the new feature since it directly impacts the company’s lucrative ad business, which is built upon data tracking.

Analysts estimate that Apple will pull in $68.67 billion in revenue for Q3. Apple’s fiscal third quarter, which runs from April to June, has already included a virtual event in which the company unveiled a new colorful line of iMac computers as well as a new purple-colored iPhone 12.

Read the original article on Business Insider

‘Sunny days in Cupertino’: Here’s what 4 Wall Street analysts expect from Apple’s fiscal 2nd-quarter earnings report

Apple CEO Tim Cook
Apple CEO Tim Cook.

  • Apple is set to report FQ2 earnings on Wednesday as investors wait to see if the company can continue its streak of earnings beats.
  • Analysts are predicting revenues of $77.35 billion and EPS of $0.99 per share.
  • Here is what four Wall Street analysts expect from Apple’s FQ2 earnings report.
  • Watch Apple trade live here.

Apple will report its fiscal second-quarter earnings after the market closes on Wednesday, and all eyes will be on iPhone sales and guidance as the Street debates whether we are seeing an iPhone “supercycle.”

The average analyst estimate for Apple’s upcoming earnings report includes revenue of $77.35 billion and earnings per share of $0.99, according to data from Yahoo Finance.

Over the last two years, Apple has beaten EPS, and revenue estimates 100% of the time.

Overall, Wall Street remains bullish on Apple’s prospects. The company boasts 26 “buy” or “strong-buy” ratings, nine “hold” ratings, and just two “sell” ratings from analysts.

Insider gathered four Wall Street analysts’ predictions for the tech giant’s fiscal second-quarter earnings report.

Goldman Sachs: A strong report is “likely,” but composition is what matters

Goldman Sachs analysts, led by Rod Hall, CFA, said that Mac and iPad sales will be a standout in the upcoming quarter. However, in Hall’s view, the really important growth figures are iPhone sales and guidance.

“Current high levels of both iPad and Mac demand are unlikely to be sustainable as the world re-opens, so another beat driven more by these areas may not be enough to drive the shares further,” Rod Hall, CFA, said.

“We continue to believe the trajectory of iPhone demand is the main determinant of whether Apple can make what we see as overly optimistic consensus forecasts for the end of 2021 and this may be the first quarter in which data points from Apple begin to confirm what supply chain adjustments already suggest,” Hall added.

The Goldman team criticized other Wall Street analysts for their belief in a “supercycle” of iPhone sales. The team said based on recent checks, they expect demand to fall off for iPhones after 2021.

Goldman Sachs holds a “sell” rating and a $83 price target on shares of Apple.

Wedbush: “Sunny days in Cupertino”

Wedbush’s Dan Ives expects an iPhone “supercycle” to be at the forefront of Apple’s earnings report on Wednesday.

The analyst said he believes Apple will beat both top and bottom-line estimates and has the potential to sell north of 240 million iPhone units in 2021.

“We have not seen a robust launch uptrend such as this in a number of years for Apple and the only iPhone trajectory similar would be the iPhone 6 in 2014 based on our analysis,” Ives said.

“While the Street is forecasting roughly 220 million iPhone units for FY21, we believe based on this current trajectory and in a bull case Cupertino still has potential to sell north of 240 million units (~250 million could be in the cards – an eye-popping figure) which would easily eclipse the previous Apple record of 231 million units sold in FY15,” Ives added

Ives also said that the Street is worried about moderation in growth due to the chip shortage, but said he “strongly disagrees” with that assessment and that this is the most “robust” iPhone cycle he has seen in years.

Wedbush holds an “outperform” rating and a $175 price target on shares of Apple.

JP Morgan: Expecting “a revenue beat” with dividends and repurchases in focus

JP Morgan analysts said that the Street’s expectations for a revenue beat have been increasing amid rising demand for Macs and iPads.

The analysts forecasted upside in both Mac and iPad sales in Apple’s FQ2 report and predicted 18% year-over-year growth in services revenue.

The team also believes Apple’s guidance will be limited in the quarter, and will mostly indicate FQ3 is typically a slower quarter for the firm. A dividend increase and share repurchases are also in focus at JP Morgan.

“We expect another $50 billion authorization similar to last year and a high single-digit percentage increase in dividends,” the JP Morgan team added.

JP Morgan holds an “overweight” rating and a $150 price target on shares of Apple.

Bank of America: “iPhone sales, capital return in focus”

Bank of America analysts, led by Wamsi Mohan, said they expect a “strong” quarter from apple with revenues in the $83 billion to $85 billion range and EPS at $1.10.

Mohan and his team believe Apple is set to outperform due to a benefit from the work-at-home trend.

“The company continues to benefit from increased spending on electronics given the remote work/home environment and from government stimulus cheques to consumers,” the analysts wrote.

Mohan is modeling a 30% jump in App store revenue and expects gross margins to benefit from a better mix and FX rates.

BofA analysts also expect a $50 billion buyback program to be announced along with a 5% dividend increase.

The bank holds a “neutral” rating and a $155 price target on shares of Apple.

Read the original article on Business Insider