Apple (NASDAQ:AAPL) stock is undoubtedly one of the best names on Wall Street. The maker of the iPhone sports a nearly $2 trillion valuation and is up more than 55% so far this year.
Now heading into its earnings report for the company’s fiscal fourth quarter on Oct. 29, there are two big things that investors should be looking for when evaluating Apple stock for 2021.
Let’s take a closer look at AAPL stock before its earnings report.
The novel coronavirus pandemic is expected to weigh on Apple stock when the company reports earnings this week. Analysts are expecting revenue of $64.16 billion and earnings per share of 71 cents. That compares to revenue of $64.04 billion in the fiscal fourth quarter of 2019 and EPS of 76 cents.
Morgan Stanley analyst Katy Huberty is even more pessimistic, estimating revenue of $60 billion and EPS of 62 cents.
I wouldn’t put it past Apple to surprise analysts, however. Remember, in the third quarter, Apple posted an earnings beat of $59.69 billion and EPS of $2.58. Analysts had only projected $52.25 billion in revenue and EPS of $2.04.
Apple’s third-quarter beat was driven on its Services growth, and I expect a similar story when the company reports fourth-quarter earnings this week.
Catalyst No. 1: Services Will Boost AAPL Stock
Apple’s Services division has become a huge money-maker for Apple stock. The division includes everything from the App Store to Apple Music, Apple Pay and licensing agreements.
Revenue from this division continues to grow. By last quarter, that figure was up to $13.2 billion, which was a $2 billion increase from the previous year.
Notably, the Services segment represents a high-margin part of Apple’s business. The company doesn’t devote the huge amounts of research and development dollars into Services as it does for its iPhone and tablet products, so the company gets a greater percentage of revenue from Services sales.
When the company reports earnings this week, watch for continued growth in the Services segment as a positive sign for AAPL stock moving forward. There may also be good information about how much the company’s streaming video service — Apple TV+ — has grown.
Catalyst No. 2: iPhone 12
Apple held its iPhone 12 event on Oct. 13 to kick off sales of its newest smartphone. The release includes four iPhone 12 models: the $699 iPhone mini, the $799 iPhone 12, the $999 iPhone 12 Pro and the $1,099 iPhone Pro Max.
Preorder sales looked good for Apple. Ming-Chi Kuo of TF International Securities estimated that in the first 24 hours, Apple sold up to 2 million iPhone 12 units.
The best thing about this iPhone release, however, is the 5G technology. I know I’ve written about this before but it bears repeating: 5G technology is a game-changing advancement that improves on artificial intelligence and virtual reality. It makes smart factories and robotics possible. It will improve self-driving cars and make connected cities a reality.
Morgan Stanley projects that Apple could sell as many as 240 million iPhones in 2020, which would top the company’s record of 231 million smartphones sold in 2015.
Analysts project that Apple will see $160 billion of revenue from iPhone sales this year, an increase of 15%.
Unfortunately, Apple doesn’t break out iPhone sales in its earnings report, but you can be sure that analysts will be asking some pointed questions this week about early iPhone sales.
The Bottom Line on AAPL Stock
Apple is one of the best growth stocks on Wall Street. Even if the company somehow fails to meet analysts’ expectations or issue guidance that disappoints, investors shouldn’t worry.
Any dip in AAPL stock should be seen as a golden opportunity to buy Apple at a discount. Apple continues to have an A grade and a strong buy recommendation in my Portfolio Grader.
On the date of publication, Louis Navellier did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article had a long position in AAPL. The InvestorPlace Research Staff member did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.