Market Overview

Apple shares (APPL) rose 7.07% over the last two trading sessions to reach a market capitalisation of $2.3 trillion. The current price of $136.87 per share is attributed primarily to the clearly positive sentiment ahead of the highly expected earnings report, which is going to be released on January 27. But the market price is already moving forward, aiming for a retest of the company's all-time high of $138.79 with even better targets in sight if positive scenarios come to light.

The famous Cupertino-based giant failed to excite the investment community in its previous quarter, which ended September 26, 2020, due to weak sales of the iPhone 11. However, that weakness was due to the fact that many devoted fans were waiting for the new iPhone 12, which was delayed because of the pandemic and didn’t go on sale until October. There was a certain logic in setting aside the money and then waiting just a month or so to get the latest 5G version of the popular gadget. So, the $108-122 price range for Apple remained intact until December, but since then prices have moved upwards.

Next Wednesday’s report will mark the first full season since Apple released its new iPhones 12 flavoured by some subscription services bundles. Even the consensus estimates of the market, averaged by expert forecasts of  Wall Street, are showing the equity per share (EPS) readings of $1.4 on historically record revenue of more than $102 bln. Just to compare, it's much more than $0.73 and $0.645 per share on $64.7 bln and $59.69 bln revenue, respectively, for the previous two quarters, but it also exceeds the profit of $1.25 per share on the $91.82 bln revenue made by Apple for the last quarter of the pre-virus year of 2019.

Nevertheless, here’s what some big financial players are saying about the tech giant prospects. Many of them are rating Apple higher than researches at Morgan Stanley for example. In a Thursday note, they predicted a record or even unique quarter. “Our recent conversations suggest investors expect Apple to release solid, but not great, December quarter results. We disagree and believe that Apple is likely to report all-time record quarterly revenue and earnings. In our view, the iPhone 12 has been Apple’s most successful product launch in the last 5 years," the analysts at Morgan Stanley wrote.

They raised their price target to as high as $152 from $144, which was also not bad at all. Their predicted quarter revenue is $108.2 bln, which is nearly 5% above consensus, with EPS estimates of $1.50. Stating so, Morgan Stanley especially pointed to the general strength across Apple’s product and services portfolio, which is driven by the adoption of 5G , by the continuation of  remote work in lockdown periods, and by sustained engagement of consumers with the App Store. Those are just several reasons why they expect a double digit of year-over-year growth for Apple’s five major revenue segments.

DA Davidson, which is another deep expert in wealth management and capital markets since 1935, projected that sales would increase 15.7% year-on-year to $106,24 bln. "On profitability, we estimate $33,525 bln of EBITDA (for a 31.6% margin), which is above the consensus figure of $31,763 bln... [as EBITDA means earnings before interest, taxes, depreciation, and amortization]. Lastly, we project GAAP [means Generally accepted accounting principles standards] EPS of $1.52, compared to the consensus estimate of $1.40,” they wrote in a fresh note. Toni Sacconaghi, an analyst at AB Bernstein, raised his first-quarter EPS estimates to $1.53 and FY21 EPS to $4.26 citing a weaker U.S. Dollar and strong Mac/iPad sales.

Another point is that on January 20 Apple launched a new service the company calls Podcasts Spotlight. The idea behind it is to shine a light on singularly talented podcast creators who are still developing an audience. This may look attractive to the loyal customers. For example, Chelsea Devantez of the Celebrity Book Club podcast, a writer and actress known for Bless This Mess (2019), kicked off Spotlight. Apple’s Ben Cave, head of the company’s Apple Podcasts business, commented: "Chelsea Devantez has created a fun, vibrant space with Celebrity Book Club for listeners to gain new perspectives on the celebrities we thought we knew. We are delighted to recognise Chelsea and Celebrity Book Club as our first Spotlight selection and look forward to introducing creators like Chelsea to listeners each month".

More than a third (37%) of Americans who are at least 12 years old listen to some podcasts monthly and nearly a quarter (24%) listen weekly. Podcast revenues are small, just about 1.5% of all TV advertising and less than 5% of radio advertising, according to Gene Munster and David Stokman of Loup ventures, but the two analysts conclude: “While bets from major tech companies do not guarantee success, they are strong indications that podcasting will continue to grow its share of total audio consumption.”

However way it is viewed, it seems very unlikely that Apple's assets could begin to suffer from a massive sell-off due to the profit-taking in the period up to January 27, which is the financial report date, as a degree of average expectations or hype is too high. So, it has a good chance to trade better than the average stock indexes. Until that date, the market may try to squeeze the maximum possible advantage out of the movement, and the future fate of Apple shares after the highly expected report will depend on its financial content.

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Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.