What to Look for from AAPL

Key takeaways

  • Analysts forecast EPS at $ 0.64 versus $ 0.99 in Q2 2020.
  • Service revenues are expected to grow at a faster pace ANNUAL, but slow from the 1st Quarter of Fiscal Year 2021.
  • Revenue across the company is expected to grow the fastest in at least 16 quarters.

Apple Inc. (AAPL) surpasses the turbulence of the COVID-19 outbreak better than most companies as millions of users live and work at home, sharply increasing demand for Apple devices and services. Although the company published a wide range of quarterly results in fiscal 2020, analysts now expect Apple to publish the fastest revenue and earnings growth in at least five years in the next fiscal 2021. Such growth is quite unusual for a company of its size.

Investors will take a closer look to see if Apple has a chance to meet these optimistic forecasts when Apple reports earnings on April 28 after the market close for the second quarter of 2021. Analysts expect the company to announce its strongest quarterly earnings per share (EPS) and YOY revenue growth in a few years. Note that Apple is currently reporting fiscal quarter results because the company’s fiscal year ends in September.

Investors will also look at another core metric, which is Apple’s service revenue, which is a significant high-margin business and is a key part of Apple’s strategy to diversify its revenue mix. In the second quarter, analysts expect services revenue to increase faster than the same quarter of the previous year, but at a slower rate than Q1 FY 2021, the last quarter reported.

Apple’s stock performance reflects overall strong earnings reports for the last quarters. The company’s shares broke off from the wider market following the Q2 FY 2020 earnings report and since then outperformed the S&P 500, sometimes by a wide margin. The stock got stronger with the Q3 FY 2020 earnings announcement. Shares of Apple fell in September 2020 before gradually recovering towards the end of January 2021, and at that point fell again. Finally, in April 2021, Apple shares soared, helping to deliver the last 1-year total return of 91.7% versus 45.4% for the S&P 500.

Source: TradingView.

Apple Earnings History

Apple’s quarterly EPS performance fluctuated during COVID-19, but remained generally positive, down 3.0% for Q4 2020. Otherwise, since Q2 2020, the first quarter reflecting the outbreak has changed between quarters of YY earnings growth. 3.8% to 34.6%. Analysts now expect Apple to significantly exceed the upper limit of this range and posted YY EPS growth of 54.8% for Q2 of 2021. This will be the fastest quarterly EPS growth seen in at least 12 quarters.

Apple’s revenue has also been steadily increasing in recent quarters. The company reported YOY earnings in 9 out of the last 11 quarters. Revenue growth almost halted with an increase of 0.5% in Q2 2020, but the pandemic era also saw strongest gains. Revenue increased by 21.4% year-on-year for Q1 FY 2021, the strongest pace in nearly three years. Analysts predict that the second quarter of 2021 will surpass even this severe rate with 32.7% revenue growth.

Apple Key Statistics
Forecast for Fiscal Year 2 Quarter 2021 Q2 MY 2020 Q2 FY 2019
Earnings Per Share ($) 0.99 0.64 0.61
Revenue (B $) 77.4 58.3 58.0
Service Income (B $) 15.7 13.3 11.5

Source: Visible Alpha

Key Metric

As noted, a major focus for investors this quarter could be Apple’s service revenue. The company is turning to services as they have significantly higher profit margins and more stable sales compared to Apple’s popular hardware products. Apple’s services include movie and TV entertainment provider Apple TV +, video game vendor Apple Arcade, news services and streaming services such as the iTunes Store and the App Store, and streaming services such as Apple Pay and AppleCare. Also various Other services that support Apple’s hardware devices. Apple’s ability to shift growth into highly profitable services shows how it can set and implement a strategy despite its enormous size.

Analysts estimate that Apple will increase its service revenue by 17.6% to $ 15.7 billion for the second quarter of 2021. This is the fastest growth in six quarters excluding Q1, which grew about 24%. The company has achieved steady and significant growth in service revenue over the past four years, with quarterly YY growth from 12.6% to 40.0%. Analysts forecast Apple to deliver an 18.8% service revenue growth for fiscal 2021, the fastest growth rate since fiscal 2018.