Investing

Earnings Previews: Apple, Starbucks, Visa

The five largest U.S. traded companies report June quarter earnings this week beginning Monday evening with Tesla. We previewed expectations for GE, Raytheon, Tesla, 3M and UPS last Friday, and we also had a look at what to look for from AMD, Alphabet and Microsoft. We will cover several more over the next few days.

By the end of this week, we shall have seen results from the five FAANG stocks. Here’s a preview of what to expect from the iPhone maker and two other top companies reporting quarterly results after markets close on Tuesday.

Apple

The June quarter is typically Apple Inc.’s (NASDAQ: AAPL) least profitable and the one with the lowest reported revenue. This year is no different, except that revenue and EPS are both sharply higher than they were last year. Just last week, the company posted a new all-time high share price, but concerns remain related to threatened government regulation and an almost certain adjustment to the company’s business practices in the App Store. Even a new generation of iPhones due in September or October will not entirely allay these concerns.

Of 42 analysts covering the stock, 32 rate Apple as a Buy or Strong Buy. Seven analysts rate the stock a Hold and the other three give the shares a Sell or Strong Sell rating. At a price of around $148.50 a share, the implied upside at the median price target of $160 is 7.7%. At the high price target of $185, the upside potential is nearly 25%.

Wall Street expects the company to post revenue of $73.44 billion, down 18% sequentially but up 23% year over year. Earnings per share (EPS) are forecast to drop 28% to $1.01 sequentially and rise by 55% year over year. For the full year, revenue is forecast to come in at $365.59 billion, up nearly 30% year over year. EPS are forecast to total $5.18, or 58% higher than in 2020.

Apple stock trades at 28.7 times expected 2021 EPS, 27.9 times estimated 2022 earnings and 26.7 times estimated 2023 earnings. The stock’s 52-week range is $93.25 to $150.00. Apple pays an annual dividend of $0.88 (yield of 0.59%).

Starbucks

The share price of Starbucks Corp. (NASDAQ: SBUX) has risen by 67% over the past 12 months. Last year, the stock price rose by 38.2%, and shares are up about 17.5% so far in 2021. As the world recovered from pandemic lockdowns, Starbucks rode the wave. U.S. sales have already surpassed pre-pandemic levels, but store re-openings are happening in fits and starts in other countries.

So, the good news is that growth in U.S. and Chinese markets is strong, though nearly complete, and re-openings in the rest of the world are a current source of concern, but also a potential growth driver going forward.