Demand for new, higher-priced 5G iPhones helped fuel a predicted 32% jump in revenue during Apple’s fiscal second quarter. Analysts surveyed by FactSet estimate that profit rose 48% compared with a year ago to $16.6 billion off $77 billion in revenue.
Investors, like Dan Morgan, are looking for signs that growth is expected to continue in the second half—even as the tech sector struggles with a microchips shortage and other uncertainties stemming from the coronavirus pandemic. Some shareholders are evidently jittery. Shares have risen 1.3% this year through Tuesday, while the S&P 500 is up about 12%.
“There’s just so little room for error—it makes it really challenging,” said Mr. Morgan, a senior portfolio manager who focuses on technology at Synovus Trust Co., which counts Apple among its largest holdings. “The market always looks six months ahead.”
Apple and other tech giants have benefited, as students and workers stuck at home turned to their products in record numbers, pushing share prices to new heights. Apple’s stock almost doubled last year. Its current valuation, as a measure of its price to earnings ratio, is the highest since December 2007, according to FactSet, and has ratcheted up expectations for the company’s results.
Apple and Its Rivals
Even as the world’s biggest tech companies continue to post record results, they remain in the crosshairs of regulators and investigators who are scrutinizing how they wield market power.
Apple’s strength in the market is being questioned by smaller tech companies. Apple this week rolled out software changes to iPhones and iPads to make it harder for apps to track users across the internet, a measure touted by Chief Executive Tim Cook as a consumer safeguard. Facebook Inc. and others have questioned Apple’s motives in the matter.
Apple is on the eve of going to trial in federal court to defend itself against claims by the maker of the popular videogame “Fortnite” that the iPhone company is engaged in anticompetitive behavior in its app store. Apple has denied wrongdoing. Observers are also watching for regulators in the European Union to reveal results soon of their investigations into claims of Apple’s monopoly behavior. Apple has said the complaints are baseless and defended its role in promoting businesses on its App Store.
Apple stopped providing detailed guidance about coming quarters last year, as Covid-19 upended daily life around the world and initially sent markets falling amid fears of a global recession. Still, analysts and investors will be looking for any signs of how Mr. Cook is feeling about the months ahead.
Combined with the previous quarter’s results, the Cupertino, Calif.-based company is on pace, according to analysts’ estimates, to finish 2021 exceeding last year’s record profit by more than 20%.
Much of the growth last year was fueled in unexpected places. Apple saw record demand for Mac computers and an 11% rise in iPad tablet sales. That growth is expected to have continued in the March period, with Mac sales rising 27% to $6.8 billion and iPads increasing 29% to $5.6 billion.
The real engine of 2021 is the latest iPhone: Overall iPhone revenue may have risen 42% to $41 billion, according to estimates.
Higher-end versions of the iPhone 12 appear to be boosting that figure. The average retail price in the U.S. during the past three months rose $52 to $847 from a year earlier, according to data from Consumer Intelligence Research Partners LLC, which surveys buyers.
The most expensive version, the Pro Max with a 6.7 inch display that starts at $1,099, saw its share grow to 20% of sales from 13% a year earlier, the survey found.
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The addition of faster 5G cellular connections to this year’s phone was expected to help Apple in China where competitors had beaten Mr. Cook to market with more advanced phones. Greater China sales may have risen 30% to $12.3 billion in the period after reaching a record in the previous quarter.
Write to Tim Higgins at Tim.Higgins@WSJ.com
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