Apple’s earnings report hits the market may underestimate its “report card” this year

Reporting period: the third quarter of fiscal year 2021

Release time: After hours on July 27 (Tuesday)

Expected revenue: $73.26 billion

U.S. stock income: $1.01

Apple (NASDAQ: AAPL) will announce its financial report after the market on July 27 (Tuesday). Investors expect Apple’s performance to exceed market expectations once again, achieving record revenue again.

Under this expectation, Apple's stock price emerged from the downturn at the beginning of the year and hit a new high. It closed at $148.99 yesterday and has risen 15% so far this year. Since the low in March 2020, Apple has brought investors more than 150% returns.

Signs show that consumer demand for Apple’s flagship iPhone has been strong, keeping Apple’s stock price alive. According to media reports earlier this month, Apple has required suppliers to produce as many as 90 million new iPhones this year, which is a significant increase from Apple’s first orders for new phones in 2020.

In recent years, the scale of the first batch of orders for Apple's new iPhone has remained at the level of 75 million. Apple has raised the order size for the first batch of iPhones in 2021 this time, indicating that the company expects to generate additional demand after the start of vaccination. This year's new iPhone will be Apple's second batch of 5G smartphones, which is a key factor in stimulating users to upgrade.

If demand expands, Apple is expected to enter a new round of "super cycle", this expectation will further support Apple's stock price higher. A large number of existing Apple users will replace their old phones, and the 5G function ensures faster internet speeds.

Apple's innovation mechanism

Apple wants to continue to grow revenue, the key lies in continuous innovation, such as the introduction of new gadgets, upgrade existing products. According to the news and media reports disclosed by Apple, Apple is indeed doing a lot of exciting upgrades.

Apple is preparing to launch a MacBook Pro notebook computer with its own chip, update the Apple Watch screen, redesign the iPad mini and the entry-level iPad.

Despite this optimism, analysts’ views on Apple’s third-quarter results appear to be somewhat conservative. Wall Street expects Apple’s revenue for the quarter to be $73.26 billion and earnings per share of $1.01.

However, Morgan Stanley analyst Katy Huberty raised Apple's target price in a recent report, saying that the recent rise in its stock price does not fully reflect the iPhone's strong performance later this year.

she says:

"Considering Apple's recent performance is too good, its share price performance may be more moderate after the earnings report is released, but the iPhone 13 will be launched in September, and we are all ready to buy this phone."

Katy Huberty gave Apple a target price of $166, which means that there is 11% upside from the current price.

Concluding remarks

Apple's earnings report may continue to benefit from strong demand for the new iPhone, as well as other popular products after the upgrade. If Apple’s performance exceeds expectations, the stock price may go higher, especially as current expectations are generally quite conservative.