Apple earnings preview: Gene Munster sees growth by Mar. 2021

“The March and June quarters will be messy for all companies, including Apple.”

From a note to Loup Ventures subscribers that landed on my desktop Tuesday:

The Quarter in Perspective

The March quarter is a once in a lifetime event (we hope). Traditional micro metrics (sales, units, ASPs , gross margin) are less relevant given this historically different period. The quarter is an opportunity to look for relevant information about Apple’s current strength, future prospects, and true intrinsic value…

Apple Weathering the Storm

The pandemic has called into question the near and mid-term health of airlines, hotels, cruise lines, restaurants, and live sports. For Apple, while regrettable, this period has amplified the company’s strengths and leadership position in tech and more broadly in society navigating the pandemic. Apple entered the pandemic strong, and the company’s products are even more a foundation of our lives compared to last year.

Guidance

Like most companies, Apple’s guidance will also be atypical. We expect a broad revenue range, potentially 15%, compared to the companies’ typical revenue guidance range of around 6%. There is also a chance the company does not give any guidance. Any approach is acceptable given this quarter will bear the brunt of the intentional economic shutdown… It should be expected that Apple’s Jun-20 quarter will be significantly lower than the Mar-20 in terms of revenue and earnings and viewed as an aberration. For June we’re expecting revenue of $46B, compared to $51B in March.

Sep-20 will likely be a transition quarter as the economy comes back online. Economic growth and vitality should be expected to quicken through the September quarter as the unprecedented fiscal and monetary support globally begins to take. We expect by Mar-21 growth will have returned.

My take: That’s just a taste of Munster’s long, reflective note. No other Apple analyst began his or her earnings preview with anything like this:

First things first. We’re reminded that analyzing the impact of the pandemic on commerce misses a global truth. The true cost is those directly affected by losing loved ones and to a far lesser extent the disruption around our lives.

6 Comments

  1. Fred Stein said:
    Yes, that’s Gene, never a false note.

    Sadly this pandemic hurts those most fragile the most, whether it’s a person’s health, or their finances, or companies, or governments.

    Let’s be mindful of our good fortune and find ways to help others, just as our favorite company has.

    Apple will come out much stronger. All their strategic investments continue un-abated, including things we can only guess at. AAPL will emerge much stronger too, as investors see Apple as invincible…yet again.

    6
    April 28, 2020
  2. Jonny Tilney said:
    Wow:

    “For Apple, while regrettable, this period has amplified the company’s strengths and leadership position in tech and more broadly in society navigating the pandemic. Apple entered the pandemic strong, and the company’s products are even more a foundation of our lives compared to last year.”

    0
    April 28, 2020
  3. Dan Scropos said:
    Per Google, search was up significantly. Does anyone know if this could translate to more than expected revenue for Apple, or is the deal with Google as the default search engine on iOS a flat annual rate that Google pays Apple?

    0
    April 28, 2020
    • Jerry Doyle said:
      @Dan Scropos: Goldman Sachs analyst’s Rod Hall claimed in 2018 that Google paid Apple $9B to retain Google as the default search engine for iOS users. Neither Google or Apple confirmed that figure. What I do recall, though, is that Rod Hall said the annual fee Google paid Apple was on the rise due to “increase” Google searches that originate via Siri. Hall said that Google could be paying Apple as much as $12B in 2019. Hall figures seem high, but to the point of your question whether the contract between Apple and Google is a flat annual rate the answer seems “no.” There may be a flat minimal annual rate, but prorated on percentage of searches on the iOS platform.

      1
      April 28, 2020
      • Dan Scropos said:
        Good info, Jerry. Thank you. Perhaps the “new new” will give Apple bargaining power when they renegotiate.

        0
        April 28, 2020

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