What financial analysts thought about Apple's Q4 2020 earnings report

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Apple on Thursday reported September quarter revenue higher than Wall Street expectations, despite iPhone sales being down. Here's what analysts expected, and what they thought about the results.

During its Thursday earnings report, Apple indicated that it made $64.7 billion in revenue during the September quarter. That beat Wall Street expectations for the period, and was driven by new revenue records in the Services and Mac segments,.

Although revenues for the iPhone during the quarter were down year-over-year, that was largely because of the later-than-usual iPhone 12 and iPhone 12 Pro launch. Apple handset shipments during the quarter didn't miss as much as some were expecting, suggesting that the iPhone SE and other models outperformed during the period.

Apple also reported that its revenue in China was $7.9 billion in sales, down significantly year-over-year from $11.1 billion. The company did not provide guidance for the December quarter.

Here's what analysts thought about the Thursday results, and what they were expecting going in.

JP Morgan

JP Morgan analyst Samik Chatterjee believes that the September quarter earnings results suggests that Apple is set up for sustainable revenue growth across its businesses.

Despite the fact that no new iPhones were released during the period and iPhone revenues came in flat, the analyst added that legacy iPhones drove an "outperformance relative to typical seasonal trends."

More than that, Chatterjee says that Services outperformed during the quarter despite investor concerns, and that benefits from new work-at-home and remote learning trends are "likely to be sticky."

"While iPhone revenues in F4Q did miss consensus estimates modestly, we see limited reason to perceive the results as anything but exceptionally strong on a stand-alone basis," Chatterjee wrote.

Prior to the earnings report, Chatterjee predicted that Apple would modestly beat Wall Street expectations with revenue of $64.7 billion during the quarter. He maintains the bank's $150 AAPL Dec. 2021 price target.


Cowen analyst Krish Sankar believes that the fact that the iPhone 12 lineup released later than usual in 2020 could set Apple up for an "especially strong [December quarter] for iPhone shipments."

Sankar added that Apple's other business segments, including Mac and iPads, saw record-setting growth despite the fact that many Apple Stores were shuttered and supply of product was constrained.

"Investors might take pause at the Sep Q iPhone units and China region demand, but we think Dec Q shipments could restore confidence in the earnings power of the 5G

upgrade cycle," Sankar wrote.

Looking ahead, the analyst believes that the iPhone 12 will drive revenue growth in the December quarter; that the Mac and iPad segments will continue to benefit from tailwinds; and the current and expanding lineup of Services bodes well for the business.

Cowen expected Apple to report earnings of $64.9 billion, slightly higher than consensus. Sankar maintains the bank's APPL price target of $133.

Piper Sandler

Piper Sandler analysts, including lead analyst Harsh Kumar, came away from Apple's September quarter earnings results "extremely bullish."

Kumar points to the fact that Apple set records in every category except iPhone. And despite iPhone weakness during the period, traction for that product category was "still strong through mid-September."

However, the analyst believes that the stock could be unduly pressured by the fact that "management was somewhat guarded about iPhone 12 commentary." He notes that Apple only has one week of data regarding the released iPhone models, and no data for the iPhone 12 mini or iPhone 12 Pro Max.

Looking ahead, Piper Sandler believes that two major questions came out of the earnings call. For one, "what drove the decline in China during the September quarter?" and "whether iPhone revenue will grow double-digits year-over-year in the December quarter."

Kumar expected Apple to report revenue of $60.9 billion during the September quarter. The analyst maintained his 12-month AAPL price target of $135.


Wedbush analyst Daniel Ives wrote on Friday that Apple "reported headline numbers that beat Street expectations but importantly came up shy on the all-important iPhone segment."

He added, however, that the slight iPhone revenue miss shouldn't come as a surprise because of the later-than-usual availability of new models. Despite weakness during the September quarter, Ives said that the iPhone 12 is off to a robust start.

The analyst maintains that Apple has a "once-in-a-decade" opportunity with the iPhone 12 and iPhone 12 Pro lineups, with an estimated 350 million out of 950 million devices within a window of upgrade opportunity.

"Taking a step back, we believe Apple is on the cusp of its largest iPhone product cycle since iPhone 6 in 2014 and we would be buyers on any weakness," Ives wrote.

Ives expected Apple to report "at least modest upside to the Street's $64 billion top-line estimate." He maintains Wedbush's $150 AAPL price target.

Morgan Stanley

On Thursday, Apple reported earnings that significantly beat Morgan Stanley analyst Katy Huberty's expectations. Prior to the earnings call, Huberty said that iPhone consensus was "too high."

She initially expected iPhone revenue to come in at $22.9 billion. Apple actually reported iPhone revenue of $26.4 billion during the September quarter, higher than Huberty's expectations but lower than Wall Street consensus.

Looking ahead to the December quarter, the analyst writes that "all signs point to a supercycle." Huberty expects significant upside to 2021 iPhone estimates, largely driven by the iPhone 12 and iPhone 12 Pro models.

She also notes that "Apple is in the midst of the broadest product cycle in its history," which could translate to accelerating growth," and she added that the strength of Services highlights the ecosystem's strength. Lack of guidance for some segments indicates supply, not demand, she added.

Huberty initially forecast that Apple would report earnings around $60 billion. After Thursday's report, she maintained her 12-month AAPL price target of $136.

Loup Ventures

Loup Ventures partner and analyst Gene Munster attributed a 4% drop in AAPL share price to investors misinterpreting Apple reporting iPhone revenue below expectations.

But he points out that the iPhone revenue miss was because of the lack of new models. "If the the timing of iPhone 12 was similar year-over-year, it's likely that double-digit iPhone growth would have been reported for the full quarter," he wrote.

Munster continues to believe that Apple is "stepping into a new growth cycle," and that its broad lineup of products are essential to a new normal during the coronavirus pandemic.

"As evidence of the strength of Apple's business, the September quarter concluded a year in which the company had record revenue, EPS, and free cash flow despite the uncertainty," Munster wrote.

Munster applies a 35x multiple on an Apple 2022 earnings estimates, resulting in a price target of $200.


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