Apple (NASDAQ: AAPL) is expected to publish its Q4 FY’21 results on Thursday, October 28. Apple’s revenues expectations to come in at about $83 billion, marking an increase of about 28.5% year-over-year. EPS is likely to stand at $1.18 per share, an increase of about 57% compared to last year. The revenue estimates are in line with consensus estimates, while our EPS estimate is slightly below the consensus.
So what are the key trends that are likely to drive Apple’s results? While Apple launched its latest iPhone 13 handsets in September, we don’t expect the device to be a major driver of Apple’s sales, as it was available for sale for just about a week in Q3. That said, we expect revenues to still see a solid year-over-year increase, driven by strong sales of the iPhone 12, higher demand for iPads and Macs as the remote learning and working trend persists, and continued growth in the services segment. However, it’s possible that Apple could be seeing some pressure on device supply, due to the ongoing semiconductor shortage. Apple’s margins are also likely to trend higher on a year-over-year basis, driven by a growing mix of services revenues, higher average prices on iPhones, and other devices.
Although Apple stock has gained about 15% year-to-date, this was underperforming the broader S&P 500 which was up by about 22% over the same period. The underperformance comes as investors rotated out of pandemic winners such as tech and work from home stocks, to more cyclical and value stocks to play the re-opening. Moreover, investors are likely concerned that Apple’s big iPhone 13 upgrade cycle could see some pressure due to the semiconductor shortage. However, if Apple manages to post a reasonably strong earnings beat in Q4, we could see the stock move higher from current levels. We value Apple stock at about $161 per share, about 8% ahead of the current market price.
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