Will iPhone 13 sales keep the Apple share price rising post-earnings?

Apple’s [AAPL] share price could be in for a boost as the tech giant is forecast to report higher revenues in its fourth-quarter earnings announcement on 28 October.

The tech titan is expected to have benefited from strong demand for the new iPhone 13 and the new iPad, as well as consumers and home workers snapping up its apps in recent months. Positive results could see Apple’s share price continue to rise.

The company is seeing demand from existing users upgrading their iPhones, but it is also benefitting from former Android users making the switch to Apple as they spend more time using their phones whilst working or playing remotely.

“Its services revenues from the App store ecosystem should continue to grow nicely – despite varying degrees of regulatory pushback in some jurisdictions – and so the stage is set for another strong quarter,” Russ Mould, AJ Bell investment director, said.

“Its services revenues from the App store ecosystem should continue to grow nicely – despite varying degrees of regulatory pushback in some jurisdictions – and so the stage is set for another strong quarter” - Russ Mould, AJ Bell investment director

 

 

Apple’s share price outpaces Samsung

Apple’s share price has stayed strong in the face of recent challenges, including disruption in its supply chain and the impact of the semiconductor shortage on its production capacities.

Over the last 12 months (through 26 October), Apple’s share price has climbed 28 1%, putting it behind Microsoft [MSFT], which has risen 45.4% in the same period, but above Samsung [005930.KS], which is up 18.9%.  

Looking ahead to the upcoming quarter, analysts are expecting sales of $85bn, up 31% on the same quarter a year ago, with earnings per share of $1.24, compared with $0.73 last year.

Wedbush analyst Daniel Ives believes Apple will do even better, forecasting $86bn in revenue. He cites robust demand for iPhones in the US and China, in particular.

“Our favourite large-cap tech name to play the 5G transformational cycle is Apple, with the 1-2 punch of its massive services business and iPhone product cycle translating into a $3trn market cap during 2022, in our opinion” - Wedbush analyst Daniel Ives

 

As reported by Apple Insider, he believes that surging demand will mean that the firm runs into iPhone13 shortages. However, this ultimately “speaks to a stronger demand trajectory than The Street had been anticipating”.

“Our favourite large-cap tech name to play the 5G transformational cycle is Apple, with the 1-2 punch of its massive services business and iPhone product cycle translating into a $3trn market cap during 2022, in our opinion,” Ives wrote.

Ives has an outperform rating for Apple’s share price and a 12-month price target of $185. According to Market Screener, analysts have a consensus buy rating on the stock and a $166.30 target price.

 

Can Apple repeat another quarter of record revenue?

During the third quarter, Apple reported record revenue of $81.4bn, up 36% on the same period last year, which beat estimates of $73.3bn. It posted earnings per share of $1.30, which were up from $0.65 year-over-year and well ahead of $1.01 forecasts.

iPhone revenue came in at $39.57bn, up 49.7%, and beat $34.01bn forecasts, while services revenue from the App Store was $17.48, up 33% and beating $16.33bn estimates. Meanwhile, Mac revenue was $8.24bn, beating $8.07 estimates, and iPad revenue was $7.37bn against $7.15bn estimates.

“This quarter, our teams built on a period of unmatched innovation by sharing powerful new products with our users, at a time when using technology to connect people everywhere has never been more important,” Tim Cook (pictured above), Apple’s CEO, said in a statement alongside the results.

  

 

Potential triggers for Apple’s share price

Analysts are expected to be taking note of free cash flow that could trigger dividends and share buybacks. According to AJ Bell, in the last quarter, Apple declared a dividend of $0.22 per share and bought back $22.9bn in stock.

In addition, any forecasts as to what Apple expects from the Christmas season will be followed closely. That could lead to probing questions about the impact struggling global chains and silicon chip shortages are having or could have on its supply chain. AJ Bell’s Mould says there have been reports that Apple has cut iPhone 13 production by 10 million units as a result.

For the October-to-December quarter, analysts are currently expecting sales of $120.4bn, an increase of 8% year-on-year, and EPS of $1.93, an increase of 15% from $1.68 for the same period in 2020.

That would mark a slowdown, as AJ Bell notes, “thanks in part to the difficult base for comparison provided by 2020, when Apple’s products and services proved perfectly suited to helping businesses function and keeping consumers connected and entertained during the pandemic and lockdowns”.