Going into its next earnings report on Wednesday (April 28), Apple faces great expectations from market watchers and analysts, who are increasingly leaning toward forecasting another blowout result.
The great expectations stem from Apple’s showstopper of an end to 2020. The company enjoyed its biggest quarter ever, boosted by soaring sales up 21 percent to $111.4 billion, as all of its offerings — the (now 5G) iPhone, iPad, Mac, Watch and ever-widening services menu — all notched double-digit growth. Apple stock wrapped up 2020 up 81 percent, adding roughly $1 trillion to its market cap over the last year.
As always, Apple is its own toughest act to follow going into its quarterly presentation, as analysts are predicting big things for arguably the biggest name in Big Tech. So what should we expect when Apple reports its earnings at the close of the market on Wednesday?
1. The Quintuple Double — and Other Great Expectations
Apple’s stock price has grown comparatively slowly since the start of 2021, but sales have been carrying on with their upward trajectory, with consensus estimates all expecting to see double-digit increases in Apple’s big categories: iPhones sales up 43 percent, to $41.4 billion; iPad sales up 29 percent, to $5.6 billion; Mac sales at $6.8 billion, up 27 percent; wearables sales (mostly Apple Watch and AirPods) at $7.4 billion, up 18 percent; and a 16 percent bump in services, to $15.5 billion.
Going into earnings, the Street expects to see that victory march carry forward with sales of $77 billion, up 32 percent from a year ago with profits of 98 cents a share. That would be the fastest top-line growth rate for any Apple quarter since March 2012, when revenues were half their current levels.
And the Apple bulls are notably expecting a bigger show in terms of earnings, such that anything south of $77 billion is going to look like a major miss.
2. Apple Pay’s Latest Card Expansion
Apple Card got a big shout-out at Apple’s spring event a week ago, with the latest update to the product making it more of a family affair. First introduced in 2019, the Apple Card has a little over 2 percent of the overall credit card sector, or about 3.1 million users, according to Forbes.
At the company’s latest event, Apple Card Family was formally rolled out to the world, designed to allow users to share the same credit card with family members. According to Apple CEO Tim Cook, the change is designed to address an imbalance in the credit card world, in which an authorized user on a primary user’s account doesn’t build their own credit.
“One of the things that became apparent to us, in the beginning, was a lack of fairness in the way the industry calculated credit scores,” he said. “When there were two holders of credit cards, one got the benefit of building a good credit history, and the other did not. We will reinvent the way this works soon. But today, we’re happy to announce that Apple Cards will allow spouses and partners to share and merge their credit lines, have equal rights under the account and build credit equally. This solution helps deliver financial equity. And it’s a game-changer.”
Whether we’ll hear more on that update — or more on Apple’s plans to “reinvent” how credit history is created — will be revealed when earnings hit the wires tomorrow.
3. Souped-Up Subscriptions
Also coming out of Apple’s latest spring event is the major change coming to Apple Podcasts’ business: subscriptions within the Apple Podcasts app. The change will allow people to subscribe to content from the app for extra perks, like ad-free and bonus content, as well as early access. The new podcast subscription service, which will cost $19.99 a year for content creators to offer up, is set to launch in 170 regions and countries next month.
This means that if a user subscribes for just one year, a podcaster will have given Apple 30 percent of that revenue. Podcasters are incentivized to keep subscribers around longer to earn more over time. What, if any, other upgrades are on tap for subscriptions will be avidly followed by market watchers.
4. The Change That Sparked the Feud With Facebook
The big iOS update with the privacy change that Facebook has been railing against for months has gone live about 24 hours before Apple’s latest earnings drop — so it seems safe to assume it is going to come up on Wednesday when Apple talks over the quarter with investors. The latest iOS updates now include the App Tracking Transparency framework, which will display a pop-up when an app wants to access a user’s unique device ID for advertisers. That pop-up will ask if the user wants to be tracked and show them why the app wants them to opt-in — for example, to provide a better ad experience for those who allow tracking.
Many companies that rely on online advertising have said the privacy change will reduce the effectiveness and profitability of targeted ads, with Facebook complaining the loudest, as Apple’s change would be a revenue-loser for the social media giant.
Not all are in agreement that Apple’s change will have such a massive effect, with some predicting that the changes will create a “fairly fleeting and minimal fundamental impact on the ecosystem.”
5. The Big Expansion Plans
Going into its latest earnings report, Apple is coming in hot, announcing big plans for big actions going forward. The company has announced it is boosting its investment in the U.S. to over $430 billion over the next five years and is bringing some 20,000 new jobs to the country.
CEO Tim Cook said in a press release on Monday (April 26) that the tech firm is “doubling down” on its pledge to invest in technology and manufacturing, with a “generational investment” intended to extend across communities in all 50 states. “We’re creating jobs in cutting-edge fields — from 5G to silicon engineering to artificial intelligence — investing in the next generation of innovative new businesses, and in all our work, building toward a greener and more equitable future,” he said.
Over the next five years, the tech giant is planning to invest 20 percent more in an effort to boost innovation and financial benefits in every U.S. state, over and above the 2.7 million jobs it currently supports in the U.S.
Investments in individual states include construction for Apple’s $1 billion Austin campus, which is already underway. Apple’s planned $430 billion in new contributions to the U.S. economy will also include data center investments, direct spending with suppliers and additional Apple TV+ productions in 20 states.
What more, and what else, is Apple is planning to roll out this year? PYMNTS will have all the highlights when results go public on Wednesday.
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