Apple earnings for Q2 of the year are due to be released today at UTC 21:00 (2pm PST). We expect the numbers to be pretty rough due to the COVID19 pandemic. If there’s anything we know about $AAPL, it’s that they are expected to maintain a strong leadership amongst the $5.1 trillion group which includes Microsoft, Amazon, Facebook, and lastly Alphabet (aka Google).
But, before we get into the less-exciting market talk. Let’s talk about why an average Apple customer should care.
Should you care? Yes you should.
Typically speaking the average Apple customer doesn’t pay much attention to the stock market, or the quarterly earnings report, which is disappointing. The quarterly earnings tell us so much about where Apple could be heading, and more important how the last few months have been.
On paper we get the revenue, profit, and all that stuff. But what they actually tell us is how the company is doing, from the investor’s side of things. When investors are happy, Apple is going to keep pushing, which for the customer means better products and improved current services. Apple at the end of the day is a business, and businesses need to keep their shareholders happy. As much as we love Apple, they have to balance a fine line between maintaining customer satisfaction, and making sure investors are confident. That being said, if it does something that shareholders aren’t happy with, it’ll revert back.
Investors react very quickly when Apple releases something new. To us its a press release, or an iOS update, but to Apple executives sometimes its a make or break moment. When Apple pushed the new iPhone SE in the midst of a global health crisis, the market reacted instantly.
Apple’s stock quickly took a dive from the pure shock that a company would do something like this at this time, but it quickly recovered. Today, in translation, we are going to see that some reactive behavior for the whole quarter, not just for the iPhone launch. Additionally, during these calls, we get a chance to hear from Apple CEO Tim Cook, where sometimes he can make some headlining statements. Last quarter he announced during the call that Apple would launch an Apple Store in India and that Apple was “well underway for the rest of the year.”
If hearing Tim Cook speak online when there hasn’t been an Apple event this year doesn’t get you excited enough, I’m really not sure what will. Now to the market side of things.
Bulls running during Bear season?
Currently a -6% “Pandemic dip” in the market is no surprise. This expectation for $AAPL is reinforced by: Credit Suisse (Philip Elmer-Dewitt), CNBC (Fast Money & Mad Money‘s Jim Cramer), Barron (Eric Savitz), Bernstein (Toni Sacconaghi), Wedbush (Dan Ives), and most significantly by Apple itself. Apple withdrew revenue guidance two months ago, in order to adapt to expected market conditions. Quarterly income is expected to shrink temporarily from $63B to $52B, this still amounts to more than $2 profit per share.
Contrary to these acceptable dips in expectations, several contrarians expect Apple to break out and take advantage of this crisis; using it to grow. These views are explored below, and also rewarded with an AppleTerminal credibility rating (based on previous spot-on $AAPL predictions; out of 5).
New York Times – “Supercharged shifts” coming… Matt Philips reports that Apple has a resilient business model, and benefits significantly from its size and marketplace momentum. Mountains of cash makes it immune to funding squeezes. This equates to less competition going forwards: Apple Terminal score: 5/5 🎯
Deutsche Bank’s Jeriel Ong says Apple has the strongest position in the market, temporary market downside pales in comparison to $AAPL owning the market longterm, therefore $285 Buy targeted. Apple Terminal score: 4/5 🎯
Forex.com‘s Jason Lubin – chart analysis shows 20 day moving averages about to surge past the 50 day moving average. This signals a “stock price above $304 very soon. Apple Terminal score: 3/5 🎯
Investor’s Business Daily joins the opinions above. They predict “an approaching Apple Buy Point“, going a step further and hinting at ways to invest more in Apple ASAP. Apple Terminal score: 4/5 🎯
CFRA (forensic and independent investment research firm, formally known as: Center for Financial Research and Analysis) spokesperson Angelo Zino reckons the “flight to quality” combined with a strong 5G demand positions $AAPL at $320. Apple Terminal score: 4/5 🎯
Overall positive justifications are derived from quarantine boosting services revenue, strong demand for remote laptops, a transition to Apple CPU, iPhone SE & floating iPad Pro successes; reopened China-based Apple stores. With near-future more-bandwidth-needed-than-ever 5G rollout and next supported devices, on everyone’s mind. Apple also hasn’t been sitting on their hands, they’ve been working remotely, producing face-masks, and of course, connecting the world with FaceTime and iMessage.
Alphabet was the only one amongst the $5.1T group that did NOT grow over 20% during this crisis. With their only real competitor out of the running, we, therefore, predict Apple will come out dominating, especially with the super performing $199 iPhone SE (and future Plus version) that exceeds any android “flagship” into and beyond the next 2-year horizon. It helps to have the iPhone 11 Pro CPU in unexpected places, like an Easter egg hunt. Remember, the top-selling iPhone last year was the iPhone 7.
With this collective roundup, and the updates regarding Apple capital return program (buybacks, repurchases, and dividend changes), it will be even more revealing to see Apple’s forthcoming Q320 guidance revealed….