Apple’s iPhone 12 is in a battle with the coronavirus. On Thursday, Apple will give a big clue about who won. (AAPL)

  • Apple will report its fiscal third-quarter earnings on Thursday, many analysts are already fixated on the company’s next major iPhone launch expected for the fall.
  • That launch will serve as a better indicator of the company’s long-term performance and value rather than recent quarterly financials given the economic impact and uncertainty caused by the coronavirus pandemic.
  • As has been the case in recent quarters, some analysts see Apple’s services business as being a potential bright spot in its third-quarter earnings.
  • But analysts will be looking for clues about whether the company’s expected 5G iPhone launch is on track for the fall. 
  • Visit Business Insider’s homepage for more stories.

Apple’s quarterly revenue is expected to shrink by nearly $2 billion — and investors don’t care. 

With Apple’s stock up more than 17% in the past three months, Wall Street is all too happy to ignore the recent lockdown-impaired business results and to focus instead on what’s in store this Fall.

The most important item on investors’ minds when Apple reports its fiscal third quarter results on Thursday will be the expected launch of Apple’s first iPhone to support super-fast 5G wireless technology. Whether the coronavirus delays the launch of the next iPhone, and how the pandemic might affect an anticipated iPhone sales “super cycle” are key questions.

“What matters most is commentary around September,” said Gene Munster, managing partner at Loup Ventures and a longtime Apple observer, calling the results of the last three months a “throwaway quarter.”

Investors and analysts want to get a sense of whether that the next phone is “still on track” and that Apple “is still producing products,” Munster said.

The results will come on the heels of a major antitrust hearing taking place on Wednesday, where CEO Tim Cook will testify alongside the CEOs of Amazon, Google, and Facebook as part of an investigation into whether large digital platforms are harming competition in the tech industry. Apple’s App Store, a critical part of its services business which has helped ease concerns about sluggish iPhone sales in recent quarters, is expected to be at the heart of lawmakers’ concerns. 

Another ‘throwaway quarter’ expected for Apple

Apple’s revenue stalled in its fiscal second-quarter as the pandemic ravaged the economy — results that didn’t come as much of a surprise considering Apple said it expected to miss its quarterly guidance because of COVID-19. Still, the company’s wearables and services division continued to show strong growth, prompting Apple to surpass Wall Street’s muted expectations.

“This may not have been the quarter it could have been absent the pandemic, but I don’t think I can recall a quarter where I’ve been prouder of what we do or how we do it,” Apple CEO Tim Cook said during the company’s earnings call in April.

Since then, Apple has re-opened numerous retail stores, only to close them once again as the coronavirus rebounded in different parts of the US and in overseas markets. Analysts expect COVID-19 will continue to muddy Apple’s performance. RBC Capital Markets is already dismissing the June quarter results as being “of limited importance to the longer-term thesis.”

Apple did not issue guidance for its fiscal third-quarter when it reported its second-quarter earnings in April, because of the uncertainty around the coronavirus.

On average, Wall Street analysts expect Apple to generate $52.1 billion of revenue in the fiscal third quarter, down about 3% percent from $53.8 billion in the year-ago period. Apple is expected to report $2.04 in earnings per share in the quarter, versus $2.18 at this time last year.

Services may be a ‘bright spot’ for Apple again 

One potential bright spot for Apple in the recently-ended quarter could be its services business, which has helped offset the company’s slowing iPhone sales in recent quarters. 

Apple store

Photo by Lisa Maree Williams/Getty Images

J.P. Morgan analysts expect Apple’s services business to “remain resilient but moderate,” while D.A. Davidson’s report, led by senior research analyst Tom Forte, suggests Apple TV Plus could give the company’s services business a boost.

Both D.A. Davidson and J.P. Morgan analysts also think its possible that the continuation of remote work and learning could have led to an increase in demand for Apple products.

But analysts are focused on an expected 5G ‘super cycle’ kicking off this fall

Apple’s iPhone launches are always closely watched, but this year is particularly important. Even before Apple unveiled the iPhone 11 and 11 Pro, which was largely expected to be an incremental launch, analysts have looked to Apple’s first 5G iPhone to drive significant upgrades. 

One of the biggest questions surrounding Apple’s next-generation iPhone is whether it will be delayed because of the coronavirus pandemic. Reports have offered varied perspectives on this point. Bloomberg reported in April that some models of the new iPhone could launch weeks later than expected, but would still debut in the fall window. Wedbush Securities analyst Dan Ives has written that he expects Apple’s iPhone launch to take place in mid-to-late September or October. 

Apple never discloses future products before it’s ready to announce them. But analysts may be able to surmise whether the highly-anticipated 5G iPhone will be delayed based on whether Apple issues guidance for its upcoming fiscal fourth quarter. 

“If they issue guidance that’s kind of low, I think from that you can kind of triangulate that the phone might be delayed,” RBC Capital Markets’ Muller said to Business Insider. “If they issue guidance that is seasonally higher compared to these last couple of quarters, then you can maybe think that the phone [may] get released sooner rather than later.”

Analysts will also likely be looking for any commentary around Wednesday’s antitrust hearings, the impacts of Apple store closures, iPhone SE adoption, Apple Watch sales trends, according to the notes from RBC Capital Markets and D.A. Davidson. 

But the expected iPhone 12 launch will probably be top of mind. Apple’s iPhone launch is more critical than ever as bullish analysts and investors are likely hoping that a 5G “supercycle” will ease any concerns about Apple’s business stemming from the pandemic.

“At the end of the day, the Apple growth story (and stock) moving higher all rests on the iPhone 12 supercycle coming down the pike,” Ives wrote in a recent note, “which we believe is the most significant product cycle Cupertino has seen since iPhone 6 was released in 2014.”

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