Apple share price: what to expect from Q4 earnings

The delay in launching the new iPhone could hamper Apple’s quarterly results, but it only strengthens the company’s position as it enters the busy holiday season.

Transcript

  • Apple had to delay the release of its new iPhones, which means sales of its newest models won’t be reflected in the Q4 results
  • But Q4 revenue is still anticipated to nudge higher as lower iPhone sales is expected to be offset by increased demand for stay-at-home tech like tablets and computers, as well as its fast-growing subscription services
  • The delay in releasing the iPhone 12 pushes focus into the next quarter, when Apple will enter the crucial holiday season with its newer and older products, giving it a strong suite of products that cover all price points
  • Apple shares underwent a four-for-one stock split in August and the stock hit an all-time high in early September, but its iPhone 12 launch event in October failed to push shares higher

When is Apple’s Q4 results?

Apple will release its fourth-quarter (Q4) results on 29 October at 2pm PT, or 9pm GMT. This will cover the three months to late September.

What to expect from Apple’s results

Apple unveiled its new range of iPhones earlier this month, introducing its first suite of 5G-enabled phones that it hopes will give consumers a reason to upgrade. This included two versions of the iPhone 12 and two pro models that offer different screen sizes to cater to all.

The Q4 results usually provide an early insight into how sales of new models are performing. However, the delays in production caused by the pandemic earlier this year means they were released in November, much later than originally planned. This means the quarterly results won’t reflect the introduction of new models, although investors should expect commentary on the matter.

This means investors may have to wait for firm numbers on sales of its new phones. To a degree, this pushes the focus to Q1 2021 – which is already a crucial quarter for Apple as it covers the busy holiday season. The company enters the season with a wide range of phones that offers suitable prices for everyone, spanning the cheaper SE model released earlier this year to the new iPhone Pro 12 Max that goes for $1399.

But investors shouldn’t expect any firm guidance from the company considering it has decided not to provide an outlook for most of this year due to the uncertainty of the coronavirus pandemic.

According to a Reuters-compiled consensus, iPhone sales are expected to decline year-on-year (YoY) in Q4, possibly because consumers delayed purchases to wait for the new models to be released. Having said that, analysts predicted a fall in iPhone sales in Q3, but were proven wrong when Apple ended up delivering strong growth across the board as it reaped the benefits of increased demand from people working from home.

Notably, it isn’t all about iPhones anymore considering they account for less than 45% of total revenue. Sales of iPads, Macs and its other products like wearables and smart speakers are expected to rise YoY in Q4, while revenue from subscription services are also expected to surge higher.

Q4 2019 result Q4 2020 estimate FY2019 result FY2020 estimate
iPhone $33.36 billion $28.69 billion $142.38 billion $140.13 billion
iPad $4.65 billion $6.11 billion $21.28 billion $23.03 billion
Mac $6.99 billion $7.89 billion $25.74 billion $27.50 billion
Wearables, home and accessorie $6.52 billion $7.49 billion $24.48 billion $30.55 billion
Services $12.51 billion $14.06 billion $46.29 billion $53.30 billion

Source: Company reports, Reuters

Apple results consensus: what does the City expect?

The Reuters-compiled consensus suggests total revenue will edge 0.2% higher YoY in Q4 as lower iPhone sales is offset by higher demand for its other products and services. Gross profit is expected to nudge 0.7% higher in Q4, but its profit at the bottom line is expected to fall 8%.

This should round off a solid year for Apple. The consensus forecasts annual revenue will be up over 5%, gross profit to be more than 6% higher and pre-tax profit is expected to rise by 2%.

Q4 2019 result Q4 2020 estimate FY2019 result FY2020 estimate
Revenue $64.04 billion $64.16 billion $260.17 billion $273.50 billion
Gross profit $24.31 billion $24.49 billion $98.39 billion $104.71 billion
Pre-tax profit $16.12 billion $14.82 billion $65.73 billion $67.08 billion

Source: Reuters

Notably, Apple completed a four-for-one stock split during the last quarter in order to bring its share price down and make it more accessible to investors. This meant it issued three additional shares for every existing share held by investors on 24 August, with shares trading on a split-adjusted basis from the last day of August. Importantly, this has a dramatic effect on per share metrics, including its dividend.

The consensus suggests Apple will pay a quarterly dividend of 20 cents in Q4, which would compare to 0.19 cents on a split-adjusted basis the year before.

How to trade Apple’s Q4 results

Apple shares reached an all-time high at the start of September but have lost ground since then, with its iPhone 12 launch event failing to push the stock higher. Still, Apple shares have soared by more than 53% since the start of 2020 and it is currently valued just shy of $2 trillion – a huge achievement considering it only passed the $1 trillion mark two years ago.

Apple remains quite tight-lipped outside its quarterly earnings and launch events, so the Q4 results will be a trigger moment for shares.

You can speculate as to whether you think Apple shares will rise and buy (go long) or, if you think they will fall, sell (go short) using either CFDs.

  1. Create an IG trading account or open My IG to your existing account
  2. Enter ‘Apple’ or its ticker, ‘AAPL.O’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

If you want to try your trading strategy risk-free then why not try an IG demo account?

Apple shares: broker recommendations

The 40 analysts covering Apple have an average Buy rating on the stock. Most analysts are bullish on the prospects of Apple’s new products, as well as the resilience of demand for tech as people stay at home for longer.

The current average target price of $121.77 suggests there is 5.8% potential upside from the current share price of $115.00.

Number of brokers
Strong Buy 11
Buy 16
Hold 10
Sell 1
Strong Sell 2
Average rating Buy
Average target price $121.77

Source: Reuters

Apple to enter the new financial year on strong footing

Tech stocks have proven to be the among the most resilient during a tumultuous 2020 and Apple has proven that demand for its products has remained strong despite the uncertain economic outlook, partly because people have continued to buy tech for both work and play as they spend longer at home. The fact its Q3 results showed it had its best ever June-quarter is a testament to that and highlights how Apple is no longer reliant on the iPhone as sales of its other products and subscription services continue to improve.

The delay in releasing the new iPhone will be a blow to the Q4 results but it isn’t expected to derail the progress Apple is making. It does, however, strengthen its position as it enters the important holiday season that will truly test the popularity of its new products. It may underperform in Q4 relative to previous years, but this should also mean it can outperform prior years in Q1.

All-in-all, Apple remains a safe stock at a time when certainty is hard to come by, proving it is one of the biggest beneficiaries from the uptick in working from home. The dividend is safe and brokers remain bullish that the stock can find higher ground, making Apple an attractive stock in the current climate.

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