Apple earnings: buybacks might boost stock as iPhone sales seen slowing – Stock Market News
- Raffi Boyadjian
After exponential growth in revenue following the launch of the very first iPhone in 2007, Apple has matured into an established player in the tech and digital world. Hence, double-digit earnings growth is no longer a common phenomenon for the Cupertino-based company. Nevertheless, Apple’s recent efforts to upgrade its existing product line-ups and expand its services portfolio have helped it boost revenue from other sources, reducing its reliance on the iPhone series. The pandemic has also been positive for sales as the stay-at-home culture has encouraged more people to buy a Mac or sign up to one of Apple’s many subscription services such as Apple Music, Apple TV+ or Apple Fitness+.
All this, plus of course the launch of the iPhone 12 series during the all-important holiday season, helped the Company post record revenue of $111.44 billion in fiscal Q1. The strong growth run likely extended into fiscal Q2. According to data by Refinitiv IBES, analysts expect revenue to have soared by 32.4% year-on-year to $77.20 billion. Earnings per share (EPS) are estimated at 99 cents, which would represent a whopping 54.6% increase over the same quarter in 2020.Not a good year for Apple shares
But despite the impressive rebound in earnings after several sluggish quarters in 2019 and 2020, analysts remain concerned about the Company’s long-term growth prospects. Apple’s share price has been underperforming this year amid reports that iPhone 12 sales have lost momentum, particularly for the iPhone 12 mini.
However, it’s possible investors have become overly pessimistic about the smartphone division and the Company may yet beat sales expectations. Sales of Mac products and iPads as well as subscriber numbers for Apple’s services could also surprise on the upside. But would it be enough to lift the stock?Just a cash cow?
Apple is already viewed as more of a cash cow than a fast-growing tech firm so as long as there are no big disappointments in the earnings announcement, investors will be more preoccupied by what the Company has to say about its share buyback and dividend plans. If Apple decides to reward shareholders with a huge cash return in the form of increased stock buybacks and higher dividend payments, the share price would probably jump higher.
Apple stock has been hovering around the 61.8% Fibonacci retracement of the January-March downtrend at $134.06 over the past couple of weeks. A break higher would bring January’s all-time high of $145.09 back into scope. Should the stock rally into unchartered territory, the 161.8% Fibonacci extension of $162.94 could be eyed next.
However, if the Company decides not to raise its dividend and share buybacks, the stock could reverse lower. Unexciting sales growth and the absence yet again of revenue guidance for the next quarter could also knock the stock down. Should that happen, the 50-day moving average slightly below the 38.2% Fibonacci of $127.24 should provide support. But if that fails, prices could soon be headed for the March trough of $116.21.Fundamentals remain solidAlthough Apple’s share price is up just over 1% in 2021, it has a similar valuation to its peers from a price/earnings perspective and therefore not particularly more attractive. However, its strong balance sheet and cash flow mean it remains a good investment and analysts are maintaining their ‘buy’ recommendation for the stock.
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.