The Short List - Apple’s packed Q1 calendar could be signaling good news ahead
This week Big Tech has started to report Q4 results, and give expectations for Q1 and beyond. These names are typically watched with much anticipation, and tend to deliver big beats over analyst estimates (the S&P 500 tech sector had a 92% EPS beat rate for Q3), but the recent sell-off in the market has tech investors looking less confident in future prospects.
Thus far we’ve had better-than-expected results from IBM and Microsoft. IBM surpassed sell-side estimates thanks to double-digit growth in consulting and cloud revenues. Microsoft also attributed their results to growth in cloud revenues which increased 32% YoY. Tonight we hear from Intel, and the tech earnings parade concludes with highly anticipated earnings from Apple Thursday after the bell.
Apple’s report regularly generates a lot of attention, and this quarter should be no exception, especially considering how the sector is taking it on the chin this year. Tech has been hit hard as surging rates make that sector’s future earnings look less attractive, pushing up the cost of borrowing needed to invest in innovation. Value compression is also a big concern, with P/Es for many names in the space ballooning in 2020 and 2021. Apple hit a peak P/E of 41.8 last December, now settling down at (a still very high) 28.5.
After hitting $3T market cap just a few weeks ago, Apple’s stock is currently down 12.21% YTD, vs. the S&P 500 which is down 9.18% and the Nasdaq which has fallen 13.57% (as of Jan 25 close). However, the company is giving non-verbal cues that suggest what they will share on Thursday’s call might be better than investors expect.
Wall Street Horizon has found that while a standalone event such as a company’s upcoming earnings release date may affect volatility, investigating multiple events closely in relationship to one another can have a stronger impact on a company’s corporate financial health. Observing the information pre-event, during the event and post-event and how they interact is critical to understand how events relate to trading and risk strategies. Currently we see a bullish event cluster lining up for Apple in Q1.
January 27 - Fiscal Q1 2022 Earnings Report and Conference Call
Apple’s Q1 event cluster kicks off with their FQ1 earnings report and subsequent call on Thursday, January 27.* Currently, sell-side analysts (polled by FactSet) are anticipating EPS to come in at $1.90 and revenues of $119B, that would suggest YoY growth of 13% and 7%, respectively. This is decent growth, although nowhere near what we saw in FQ2 and FQ3 when profit growth soared above 100%. Fiscal Q2 and Q3 EPS 2022 growth are currently projected to come in negative.
February 7 - Future Dividend Announcement
Apple has a history of announcing quarterly dividends, with one increase a year. On February 7 they are projected to announce an unchanged dividend of $0.22.* This track record of consistently increasing dividends and their ability to pass off higher prices could make Apple attractive as interest rates rise by insulating investors from inflation while offering a yield that (albeit increasing) bonds don’t.
February 18 - Video Release of Luck
On February 18 AppleTV will release the computer-animated fantasy film Luck*, starring Jane Fonda and Whoopi Goldberg. This is nearly a year after the film was initially scheduled to be released (March 19, 2021).
While Apple TV still owns only a small portion of the streaming market (according to JustWatch it’s 5%), that number continues to grow despite immense competition from behemoths such as Netflix and Amazon Prime. Those latter two names saw a steady deceleration of growth in 2021, with Netflix just announcing on their recent Q4 call that despite huge global hits such as “Squid Game” last year, new paid subscribers fell to their lowest level since 2015. This opens up the door for Apple TV to steal even more market share in 2022.
March/April - Spring Product Event
For the last decade Apple has held its annual spring event in March or April to announce new products. There has been no official announcement about when this year’s event will take place, but there is speculation that it will return to March (as it was from 2011 - 2019), after not being held in 2020 due to COVID lockdowns, and then being held virtually on April 20 of last year. At this year’s event the company is expected to announce their 5G Phone SE and newest iPad.
*Source: Wall Street Horizon