When Apple (AAPL) reports quarterly results on Wednesday, analysts expect the 5G wireless upgrade cycle to boost iPhone sales, and see the work-from-home and learn-at-home trends lifting Mac and iPad sales. But annual adjustments to the company’s capital return plan could be the sugar on top. Apple stock is treading water ahead of the news.
Wall Street is predicting that Apple will earn 98 cents a share on sales of $77.1 billion in the March quarter. That would translate to year-over-year growth of 53% in earnings and 32% in sales.
Apple also is due to revise its capital return plan, including share buybacks and dividends.
Morgan Stanley analyst Katy Huberty expects Apple to be “slightly more aggressive” with its capital return plans this year. She believes Apple will increase its share buyback authorization by $60 billion and hike its annual dividend payments 10%. Last year, Apple raised its share buyback authorization by $50 billion and increased its dividend by 6.5%.
Apple Stock Moving Sideways
That would be on top of an expected strong March-quarter performance, she said in a note to clients Tuesday.
“We expect next week’s report to highlight the strength of Apple’s diverse product and services ecosystem,” Huberty said. She rates Apple stock as overweight, or buy, with a price target of 158.
In afternoon trading on the stock market today, Apple stock rose 2.2%, near 134.90. Apple stock has been moving sideways in a tight trading range since April 13. It has faced overhead resistance around the 135 level.
Wedbush Securities analyst Daniel Ives believes “the iPhone 12 supercycle theme” will be “front and center” during Apple’s fiscal second-quarter report. The iPhone 12 series handsets, launched late last year, are Apple’s first 5G-enabled smartphones. Ives thinks the iPhone 12 family kicked off a supercycle of upgrade activity among iPhone users.
On Friday, Ives reiterated his outperform rating on Apple stock with a 12-month price target of 175.
IPhone 12 Supercycle Questioned
However, Goldman Sachs analyst Rod Hall is skeptical of the iPhone 12 supercycle thesis.
In a note to clients on Tuesday, Hall said Wall Street’s iPhone sales estimates are “overly optimistic” this year. “This may be the first quarter in which datapoints from Apple begin to confirm what supply chain adjustments already suggest,” he said.
Hall rates Apple stock as sell with a 12-month price target of 83.
“The main driver of our current sell rating is simply that we expect demand to fall off in 2021 in a normal pattern, while we believe consensus forecasts expect late 2020 unit demand levels to persist into late 2021,” Hall said.
Apple’s earnings report follows the company’s spring product launch event where it introduced AirTags item trackers and new iPad Pro tablets and iMac computers.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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