Apple AAPL stock helped the Nasdaq to achieve new highs this week and the company reached its own records on Friday heading to release its first-quarter earnings results for fiscal year 2021 on Wednesday, January 27. Apple has now jumped nearly 30% since the end of October and analysts have reported on the latest iPhone model.
Apple needs no introduction as it continues its steady expansion outside iPhones in services and more. But despite their successful diversification, its flagship smartphones still play a vital role in the company and on Wall Street, accounting for 50% of total revenue in fiscal year 2020.
Fortunately, Wall Street ranks high with the first iPhone with 5G technology that was launched in October. IPhone is available in four models with different prices. Apple has priced its high-end models roughly the same as the iPhone 11 last year, despite new features and 5G capabilities. Morgan Stanley analyst Katie Huberty described the iPhone 12 as „the most successful product launch for Apple in the past five years“.
Apple has also benefited from increased Mac and iPad sales during the remote work and school environment. The wearable device unit, which includes its popular smartwatch and wireless headphones, grew by 25% last year, topping the main services unit with 16%.
Apple now has revenue streams coming from its huge app store, subscription services like Apple Music, Spotify’s rival, Spotify, as well as the TV streaming service it hopes to rival Netflix NFLX among others. The company also has news shows, video games, and more.
Apple’s paid subscriptions grew by more than 35 million compared to the previous quarter, to more than 585 million paid subscriptions across its various services in the fourth quarter. Executives expected the total number to reach 600 million before the end of the 2020 calendar year.
Before moving forward, it’s also worth noting that Apple is pushing harder to bring more of its chips inside the company. The move is expected to help cut costs, improve battery life and performance, as it continues to close the loop, while diversifying. There are even reports that Apple is trying to enter the electric vehicle space.
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Apple’s ambitious plans could go further given that it ended the fourth quarter with nearly $ 80 billion in net cash. The company has been slowly reducing its cash position in an effort to reach a „cash neutral position over time“. In the last quarter, it returned nearly $ 22 billion to shareholders via dividends and buybacks – the dividend yield has stabilized at 0.60% for now.
Apple also remains the world’s most valuable brand and its stock price has surpassed Microsoft MSFT and Amazon AMZN over the past five years, with an increase of 460%. Recently, its shares have risen 75% in the past year and 22% in the past three months.
Apple is trading at 7.1X 12-month forward sales. This is only a slight premium to their industry and is a stiff opponent of 10.2X from Microsoft, as it has been for years. A split of AAPL’s shares down 4 to 1 at the end of the summer made it more achievable and attractive to many investors.
The pandemic forced Apple to delay the release of the next generation iPhone until October, not late September. This will help it increase its sales for the first quarter of fiscal year 2021 slightly, as it is rising against a comparable period.
Zacks estimates that Apple’s adjusted first-quarter earnings will rise more than 11% to $ 1.39 a share, at nearly 12% of strong returns that will reap over $ 100 billion in one quarter for the first time ever, at $ 102.6 billion.
Apple’s 2021 fiscal revenue is then expected to jump 17%, with its adjusted earnings expected to rise by 23%. And AAPL’s positive long-term earnings reviews are helping Zacks’ # 2 (buy) rating now.
There is always the risk of running a stock to make short-term gains around profits, especially when it rises to new highs and heads towards earnings. However, long-term investors should not have to worry about trying to timing Apple if they are optimistic about its success.
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