Why Apple Must Have a Blowout Earnings Report and Strong Guidance

Apple Inc. (NASDAQ: AAPL) is scheduled to release its fiscal first-quarter financial results after the markets close on Tuesday. The consensus estimates are calling for $4.55 in earnings per share (EPS) and $88.5 billion in revenue. The same period of last year reportedly had $4.18 in EPS and $84.3 billion in revenue.

The iPhone giant has seen its shares surge ever higher, and analysts chasing the stock also have many scenarios for additional upside, perhaps even to $400. At $312 a share or so now, it has continued hitting all-time highs and has a market cap of about $1.4 trillion.

iPhone sales reached an extraordinary level of 78 million in the holiday quarter of 2016. Sales have run below that since then, sometimes much below. Analysts believe that new iPhones have not been enough of an upgrade from their predecessors over the past three years. The upgrade cycle slowed. However, it may have picked up again.

The iPhone 11 has sold briskly, according to nearly every estimate of its unit sales. The holiday quarter was the first when the iPhone 11 was available for an entire quarter. The iPhone 11’s camera, speedy processor, video capture and battery life appear to be different enough from earlier iPhones that the “replacement cycle” may have sped up. It will need to have surged for Apple stock to move higher than the 100% rise that it has posted over the past year.

If iPhone sales did indeed hit record levels, investors will begin to look to the iPhone 12. It should be released this fall. There are rumors that there will be six versions. That means it will be available at enough price points that people who want an “affordable” version can buy an iPhone 12. A fully featured model will sell for well over $1,000. Apple sales have shown in the past that there is a model for iPhones this expensive.

Excluding Tuesday’s move, Apple stock had outperformed the broad markets with a gain of 96% in the past 52 weeks. Over the past quarter, the stock was up 27%.

Here’s what some analysts had to say ahead of the report:

  • Nomura/Instinet reiterated its Neutral rating on January 17, but its $225 target, which had been close to a street-low, was hiked to $280.
  • Morgan Stanley reiterated its Overweight rating and raised its target price to $368 from $296 on January 17.
  • Canaccord Genuity reiterated its Buy rating and raised its target to $355 from $275 on January 15.
  • Atlantic Equities downgraded it to Underweight from Neutral with a $275 price target on January 14.
  • D.A. Davidson reiterated a Buy rating and raised its price target to $375 from $300 on January 13.
  • Credit Suisse reiterated it as Neutral but raised its price target from $221 to $275 on January 10.
  • Needham reiterated a Strong Buy rating and raised its price target to $350 from $280 on January 6.
  • Merrill Lynch reiterated a Buy rating and raised its price target to $330 from $290 on January 3.
  • Wedbush reiterated it as Outperform and raised its price target to $325 from $350 on December 23.
  • Piper Jaffray reiterated it as Overweight and raised its target price to $290 from $305 on December 20.
  • Cowen reiterated an Outperform rating and raised its price target to $290 from $325 on December 17.

Shares of Apple were last seen up about 1% at $312.08 on Tuesday, in a 52-week range of $154.11 to $323.33. The consensus price target is $295.00.

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