Breaking News

Apple is about to provide its first look at how badly the coronavirus pandemic has shaken its business (AAPL)

Tim Cook
  • Apple reports its fiscal second quarter earnings on Thursday, providing the first look at how its financials have been impacted as a result of the coronavirus pandemic.
  • Analysts are estimating that Apple could report around $54 billion in revenue for the second quarter, compared to the $63 to $67 billion the company originally projected.
  • Apple said in February that it did not expect to meet its Q2 revenue guidance because of the pandemic.
  • Analysts will be looking for answers about iPhone demand and whether the coronavirus will impact the company's expected 5G iPhone launch.
  • Visit Business Insider's homepage for more stories.
When Apple reported its fiscal first quarter earnings back in January, the coronavirus was almost an afterthought.
While its revenue guidance gave a large range of possibilities to account for the virus, it was Apple's stellar iPhone sales and soaring revenue that dominated most of the spotlight — largely driven by the positive reception of the iPhone 11 and 11 Pro and booming wearables sales.
Apple's fiscal second-quarter earnings report is going to look very different. The coronavirus pandemic has upended business and daily life around the world, rewiring how Apple develops and sells its products. And when the company reports its earnings on Thursday, Wall Street will get its first quantifiable look at how the virus has impacted Apple's global business.
Apple said in February that it did not expect to meet its second-quarter revenue guidance of between $63 billion and $67 billion because of weakened consumer demand and supply chain disruptions caused by the virus.
The tech giant didn't provide a new estimate for second-quarter revenue. But analysts are expecting Apple to report revenue of about $54 billion for the March quarter, according to estimates compiled by Yahoo Finance and Seeking Alpha. Still, even those projections may not paint a clear picture of what to expect when Apple reports earnings after the bell on Thursday.
"I don't want to discredit our work, but we're guessing, and other people are guessing," Robert Muller, enterprise hardware analyst for RBC Capital Markets, said to Business Insider. "To try and quantify the impact of the pandemic in terms of demand or supply chain impact ... I don't think anyone really has a great handle."
Regardless of what the numbers show, some analysts see a reason to be positive about Apple's future and growth prospects, even if the virus does impact the company's highly-anticipated product launches.
An increased reliance on technology as people are stuck at home under lockdown orders, Apple's efforts in the health space, and the company's already strong brand will enable the tech giant to remain resilient throughout the pandemic, some analysts say.
Apple's services business, which encompasses offerings like Apple TV Plus, Apple Care, and Apple Music, is expected to remain an area of focus in the company's Q2 results.

There two reasons to anticipate healthy services performance. One is that many of these offerings are recurring subscriptions that don't rely heavily on new hardware sales. The other is that people are spending more time at home, meaning they may be more likely to try Apple TV Plus, according to Muller and Tom Forte, a senior research analyst at DA Davidson.
"A lot of those revenues should be a little stickier, since some of them are subscription-based and shouldn't be as discretionary, like a phone purchase for instance," said Muller.
Not everyone shares that optimistic view. On April 17, Goldman Sachs downgraded Apple and rated the shares "sell," citing weak consumer demand throughout 2020. The firm also said Apple's average selling prices would decrease and projected that iPhone sales could dip by 36% in the second quarter.
On Apple's earnings call, analysts will be looking for signals about the rumored 5G iPhone that's expected to launch this fall, especially considering multiple reports have suggested it could be delayed. They'll also probably be seeking as any general commentary around Apple's expectations in terms of overall iPhone demand.
Apple also just released the $400 iPhone SE on April 24, so analysts will likely be curious about what reception has been like moving into the June quarter.
"I would say historically their value-priced smartphone efforts have not done well," Forte said to Business Insider. "But I think given the challenging macroeconomic environment, the setup has never been better for a value-priced iPhone in that regard."
It may also be difficult for Apple to issue revenue guidance for the June quarter because of uncertainties around the pandemic, says Muller. But he doesn't expect that any ramifications stemming from the pandemic, whether reflected in the March or June quarter's results, will materially impact Apple's value and performance more than any other company attempting to navigate a pandemic.

"It's going to be a messy quarter," Muller said. "It's going to be a messy quarter for any company."
SEE ALSO: Apple's $400 iPhone SE is a sign of a new direction for the company, and a sign that it's finally starting to take Android seriously
Join the conversation about this story »
NOW WATCH: Why electric planes haven't taken off yet

* This article was originally published here
http://feedproxy.google.com/~r/typepad/alleyinsider/silicon_alley_insider/~3/9ltU0ci_LrI/apple-q2-earnings-coronavirus-covid-19-impact-iphone-services-2020-4
Press Release Distribution

No comments