Apple’s mixed Q4 2020 results: What the analysts are saying

Excerpts from the notes I’ve seen. More as they come in, new notes on top.

Toni Sacconaghi, Bernstein: The punchline is simple: iPhone revenues have to grow double digits YoY in FY Q1 YoY, or March needs to be dramatically stronger than seasonal for this cycle to have a shot of being the super cycle buyside investors appear to be anticipating. Market Perform. $100.

Jim Suva, Citi: This marks the third quarter in a row where Apple did not give financial guidance. We fully understand the prior two quarters when society was largely locked down due to COVID-19 however our view is society is gradually getting back to a new normalcy with retail stores, schools, and onsite work locations gradually reopening. So we are a bit surprised Apple did not give an outlook. Buy. $125.

Tom Forte, D.A. Davidson: As we stated in our earnings preview, we believe Apple’s first lineup of smartphones on 5G networks are better positioned than investors completely appreciate. Buy. Target to $133 from $120.

Matthew Cabral, Credit Suisse: Growth was solid ex-iPhone and we continue to believe a short-term launch timing shift isn’t a big deal; however, all eyes remain squarely on the performance of Apple’s 5G iPhone and C3Q results did little to settle that debate (particularly without firm guidance). Neutral. $106.

Aaron Rakers, Wells Fargo: While Apple did not provide a specific revenue guide for F1Q21, pointing out the later iPhone 12 product cycle (4 weeks into qtr for iPhone 12 / 12 Pro; 7 weeks for iPhone 12 Mini / 12 Pro Max), we think the company’s qualitative commentary will be viewed positive. Overweight. $140.

Jeriel Ong. Deutsche Bank: Expectations were high going into the quarter, and without an explicit range for iPhone Dec-qtr guidance, unexpected China weakness in the Sept-qtr, and a report that barely beat Street expectations, we see the resulting uncertainty giving some investors a more fearful outlook and weighing on shares modestly. Buy. $140.

William Power, Baird: While we suspect investors will look at iPhone performance negatively, we consider the performance quite solid considering that (1) there was slight sequential improvement, and the prior quarter included the launch of the SE and (2) sales slowed after mid-Sept, which is understandable in the weeks ahead of an annual upgrade. Outperform. $132. 

Christopher Caso, Raymond James: Apple posted a strong September quarter, with revenue managing to grow Y/Y despite the absence of new iPhones in the quarter, due to exceptional growth in iPads, Macs, wearables and services. This is better than we had expected, as we had anticipated the iPhone transition, but didn’t expect other categories to be as strong. Outperform. Target to $140 from $120.

William Power, Baird: While Greater China weakened, due in part to iPhone timing, all other regions grew YOY. Notably, AAPL was bullish on current iPhone 12 trends in China, which should drive improved performance. Outperform. $133.

Andrew Uerkwitz, Oppenheimer: Record September Quarter Despite Product Launch Delay. Despite uncertainties surrounding the current environment, we believe that Apple is well-positioned to leverage its carrier relationships to ensure success of its 5G-enabled iPhones, recover from this quarter’s China setback, and gain momentum for Services revenue from Q4 Apple One and Apple Fitness+ launched. Outperform. $125.

Ianjit Bhatti, Atlantic Equities: With Apple set to release new Macs with its own CPUs before the end of the year we believe that there is an opportunity for continued PC market share gains, further adding to structural tailwinds from changing working practice. Overweight. $150. 

David Vogt, UBS: Much ado about nothing. Focus on 1Q Outlook Despite Mixed Q4:20 Results. The timing of the iPhone 12 launch and mgmt’s related opaque comment ‘we expect iPhone to grow during the Dec quarter’ likely keeps the shares in a holding pattern until the market gains clarity on both the supply chain as well as store closings and re-openings given recent concern around COVID-19. Neutral. $115.

Michael Walkley, Canaccord Genuity: We believe Apple is well-positioned to benefit from the 5G upgrade cycle with their slate of new phones exiting Q1/F21 and anticipate strong overall growth trends as 5G smartphones ramp and Apple continues to grow its installed base and higher-margins services revenue. Buy. $145.

Tim Long. Barclays: The Dec-Q outlook calls for iPhone revenues to grow, which means ~80% q/q improvement, while all other segments are expected to see double-digit y/y growth. The iPhone rebound is impressive, but our overall view remains that the new phones will not drive much growth past FY21. Equal weight. $100

Wamsi Mohan, Merrill Lynch: A modest beat in Sep with a qualitative rev guide for Dec is likely to temper near term enthusiasm. We reiterate Neutral given (1) Upside to Dec qtr is limited given the later launch of iPhones and potential supply constraints, (2) iPhones grow marginally in Dec qtr despite carrier incentives which could moderate by March qtr, (3) March qtr upside comes at the expense of Dec qtr, not materially changing the year. Neutral. Price target lowered to $135 from $140.

Daniel Ives, Wedbush: Headline Beat with iPhone Revenue Falling Short; Focus on iPhone 12 Trajectory. Last night Apple reported headline numbers that beat Street expectations but importantly came up shy on the all-important iPhone segment. This should not come up as a shock to the Street as with the iPhone launch hitting 4-6 weeks later than typical, Cupertino saw customer buying pause ahead of its flagship iPhone 12 launch, especially in the key China region. With pre-order activity tracking more than 2x vs. the iPhone 11 a year ago based on our analysis from Asia suppliers, we believe iPhone 12 is off to a robust start out of the gates and should translate into a massive holiday quarter for Cook & Co. with clear supercycle-like momentum into 2021. Outperform. $150. 

Katy Huberty, Morgan Stanley: All Signs Point to a Supercycle. Our confidence in Apple’s ability to retain existing users, attract new users and accelerate growth and profitability has never been higher as Apple enters FY21 with its strongest Product and Services portfolio in years and several tailwinds at its back, including 1) the growing proliferation of 5G technology, 2) work, learn and play from home demand, and 3) rising adoption and monetization of digital services. Most importantly, even without the full impact of new products and services Apple is growing double digits in every category with overall revenue growth of closer to 30% after adjusting for the timing of new iPhone model shipments compared to a year ago. Overweight. $136.

Samik Chatterjee, J.P. Morgan: Robust Results Across Products & Services Despite Headwind from Product Delay. Apple reported a robust set of F4Q (Sep-Q) results when viewed in the context of +25% y/y revenue growth in businesses excluding iPhones, and flat sequential revenue for iPhones, despite the absence of the new iPhones in the quarter and with legacy iPhones driving an outperformance relative to typical seasonal trends (e.g. volumes on average declining -24% q/q for legacy iPhones in the last two years). 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. Overweight. $150. 

Harsh Kumar, Piper Sandler: Walked Away Confident – iPhone 12 Ramp Coming. Overall, we walked away extremely bullish from the earnings announcement, as Apple set records in every category except the iPhone during the September quarter. All non-iPhone categories grew significantly Y/Y, while the iPhone segment was impacted by the delayed launch. However, iPhone traction was still strong through mid-September. We feel the stock may be unduly pressured tomorrow, as management was somewhat guarded about iPhone 12 commentary. Overweight. $135.

Gene Munster, Loup Ventures: Apple Is Stepping Into a New Growth Curve. Apple shares traded down 4% after hours, giving up gains on the day, as investors misinterpreted the company reporting iPhone revenue below expectations, along with a perceived lack of visibility for the December quarter… It’s rare for Apple to miss an iPhone number. It’s even rarer for the company to delay the timing of the release of its flagship product by four to eight weeks, complicating how to benchmark the September iPhone revenue number. Thankfully, Tim Cook reported the one data point needed to baseline the results – the iPhone growth rate in the most recent quarter, prior to the shift in the timing of the new iPhone. Cook suggested the iPhone business was growing double digits until mid-September. If 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. In other words, iPhone was on track to grow 10%, compared to the -21% they reported.

Amit Daryanani, Evercore ISI: Ignore The Noise As iPhone Units Will be STRONGER for LONGER. AAPL reported a strong Sept-qtr with a print of $64.7B/0.73 vs. street at $63.7B/$0.71 as strength across Macs, iPads, Wearables, and Services more than offset weaker iPhone revenues. While AAPL refrained from providing an explicit Dec-qtr guide, they do anticipate positive y/y growth across the portfolio and gross-margins remaining flat on a q/q basis. Overall, given ongoing macro uncertainty, we think this is a prudent call especially as two of the four new iPhone products have not begun shipping yet (Pro Max and Mini). Fundamentally, we see an upside bias on the name. Outperform $135.

Daniel Ives, Wedbush: First Take at Numbers; Drumroll Quarter into Supercycle; All Focus on FY21. After the bell Apple announced its FY4Q20 (September) results that featured a top and bottom line beat; but the main spotlight will be on the slight iPhone revenue miss as well as lower than expected revenue coming out of China although the stage is setting for massive growth in this region for FY21 in our opinion. Outperform $150.

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10 Comments

  1. Jonny Tilney said:
    Incredibly mistaken take on the results by the market, marking down by 5.3% currently. Snippets above support what we see – good results setting up a multi-year  superboom.

    5
    October 30, 2020
  2. Jerry Doyle said:
    Did Gene Munster project a price target?

    Interestingly, no matter the market’s initial reaction sending Apple stock price falling in after hours trading yesterday evening, everything I am reading in the press and listening to in the media denotes how Apple is hitting on all cylinders. Numbers in all categories except iPhones were strong and as we know the new generation iPhone upgrade cycle had slippage into the December quarter and will not reflect full quarter sales performance until the March quarter. Nothing about yesterday’s financial results are anything other than solid strong growth performance.

    Analysts apparently want clarity on the forthcoming iPhone 5G cycle and they will not get that definitive clarity until its full Q2 2021 performance sales figures. Q1 will give only partial sales performance figures.

    3
    October 30, 2020
    • “Did Gene Munster project a price target?”

      Nope. Not since he transitioned from analyst to venture capitalist.

      2
      October 30, 2020
  3. Fred Stein said:
    Best quote: Gene; “Apple is stepping into a new growth curve.” Also, Katy, Samik, Amit, Harsh, and Daniel get it. And, here is more:

    The iPhone 12’s WILL take share from Android, especially in EU..Apple will grow in India, based on policy changes and Apple’s investments.

    Apple adds 100M to its 1B iPhone IB within 2 years.

    3
    October 30, 2020
  4. Peter Kropf said:
    Anyone think that the mrkt may be going down into this strained election season?

    We have Trump assuring everyone that if he loses, it will be the result of fraud. He’s massively damaged the USPS’s ability to handle mail! He wants to close mail-in votes ASAP, including our foreign military’s vote. He’s inviting ‘poll watchers’ to intimidate voters.

    Finally, I think he’s on record for not pledging to leave office if he loses!

    Where do you think stocks will go next week?

    1
    October 30, 2020
  5. David Emery said:
    Is it fair to split the ANALysts into 2 categories?

    1. iPhone numbers are down, Apple is doomed!

    2. iPhone numbers are only part of the story, Apple is preparing to launch!

    (If I had any spare change, I’d buy more AAPL today.)

    3
    October 30, 2020

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