The consensus seems to be that sales of the new device will be very strong, although a “supercycle” may take more than a single quarter to play out.
Many analysts think that iPhone 12 sales could drive record December quarter results, with Apple’s quarterly revenue climbing above $100 billion for the first time.
“All signs point to a strong launch quarter for the iPhone 12,” Morgan Stanley analysts wrote in a note to investors last week. “In our view, the iPhone 12 has been Apple’s most successful product launch in the last five years.”
Wall Street expects Apple to post earnings of $1.41 per share on total quarterly sales of $103.3 billion, a 12.5% jump in revenue from the same period in the prior year, according to Refinitiv.
Analysts’ consensus estimate is that iPhone sales will hit $59.8 billion, a nearly 6.9% year-over-year increase — but that’s a lower growth rate than iPhone sales posted during the same period a year earlier. (Some individual analysts have iPhone sales for the December quarter pegged higher.)
executives last quarter said they expected single digit-percentage growth in iPhone sales during the three months ending December 31.
“Based on our Asia supply chain checks, we strongly believe the iPhone 12 supercycle hype has become a reality,” Wedbush analyst Dan Ives said in an investor note last week.
The earnings report also comes as Apple’s stock has continued to soar in recent weeks. Its shares have risen nearly 85% in the past year, and its market cap this week has reached an all-time record above $2.4 trillion.
Why so much pressure on the iPhone 12?
Hopes are high for the iPhone 12 because it’s the first Apple device that can connect to 5G, the superfast wireless networks
expected to create new capabilities for consumers and businesses.
The past several iPhone releases “haven’t really given users a reason to upgrade,” said Tyler Ellegard, investment analyst at Gradient Investments. That led to disappointing iPhone sales numbers
in recent years.
With the iPhone 12, experts have said 5G connectivity could be a big enough change to encourage hundreds of millions
of Apple users to upgrade. The fast download speeds and low lag time that 5G enables could make for a better experience using Apple services such as Apple Arcade.
However, there are major questions surrounding the iPhone 12 launch: Will people really shell out for an upgrade during the economic recession caused by the pandemic? And with 5G networks still in their early days
, would consumers experience enough of a difference
to even want to?
D.A. Davidson Analyst Tom Forte said in a note last week that he thinks Apple’s lineup of 5G smartphones are “better positioned than investors completely appreciate,” in part because of carrier promotions
There may also have been a jump in iPhone sales during the December quarter not because of 5G, but because consumers haven’t upgraded in a few years and want other perks
such as the iPhone 12’s impressive array of camera features, Ellegard said.
For the consumers who did upgrade during the fourth quarter, multiple analysts say they expect more sales of the higher-end versions of the iPhone 12, the Pro and the Pro Max, a potential boost to the company’s gross margins.
“A lot of it has to do with working from home,” Ellegard said. “People are spending more time on their phones, playing games, video calling, even just typing out emails. Upgrading to the Pro or Pro Max to have that bigger screen size … I think that’s where people will be spending their money.”
What else will analysts be watching?
The iPhone wasn’t the only big Apple product to go on sale in recent months. The company also released
the eighth-generation iPad and a redesigned iPad Air, the Apple Watch Series 6 with new watch faces and health monitoring features and a new Mac lineup
powered by chips designed in-house.
But analysts will likely pay special attention to how Apple’s services segment
performed. Although iPhones remain the company’s biggest revenue driver, it has been increasingly working to become more of a services business.
Apple’s fitness subscription offering, Fitness+, launched
during the quarter. And the ongoing pandemic and continued stay-at-home orders may have boosted subscription growth for Apple TV+.
The persistent growth of Apple’s stock likely has much to do with the services business, Gradient’s Ellegard said.
“People are changing how they value the company,” he said. “It’s easier to forecast future sales when you have the recurring subscriptions, and it’s also a higher margin business. It’s a better business model, to be honest.”
Apple executives could also provide insight into what they’re thinking about the new administration’s potential impact on their business during Wednesday’s earnings call. Although early Biden moves such as overturning Trump’s travel ban were likely welcomed by Silicon Valley, Big Tech continues to face major challenges
in Washington DC.
“We see the potential of a return to a higher corporate tax rate as the biggest risk to Apple, from the changing of the guard to President Biden from President Trump,” D.A. Davidson’s Forte said in a note, adding that it could also hurt Apple if Biden continues Trump’s tariff war with China
. “We look for comments from management on those risks.”