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Apple’s $100bn sales, Tesla battery plans and Facebook churn – what to watch for as big tech report

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Microsoft set a storming benchmark for the other tech giants last night but hopes are high that today’s announcements from three more members of the FAANG+ club will be just as good.

Here are a few things to watch for.

The big number for Apple Inc (NASDAQ:AAPL) outside of its eye-popping US$2trn-topping market valuation, is US$100bn.

This is the quarterly revenue record that most analysts expect the Cupertino company to notch up for the first time in its history.

Hitting the Wall Street top-line forecast of $102.6bn would equate to year-on-year growth of 12%, its fastest progress in ten quarters.

The past quarter, including both Thanksgiving and Christmas, tends to be the one that generates the most product enthusiasm and upgrades for Apple, with new upgrades launched for the iPad, new Apple Watch and the new Apple ONE subscription bundle of Apple Music, Apple TV+, iCloud, Apple News, Apple Arcade and Apple Fitness+ which have been grouped together to take on Amazon Prime.

“This looks like an attempt by Apple to tap into the lucrative online fitness market with a Fitness Plus option which connects to the Apple Watch and tailors’ online workouts where you can do virtual workouts online,” says analyst Michael Hewson at CMC Markets.

“The new iPhone 12 which was announced a month later in October was rather underwhelming, though we did finally get the long awaited 5G model.”

Expect the focus to be on Apple’s hardware sales in these first-quarter results, said analyst Susannah Streeter at Hargreaves Lansdown, as while there has been a lot of fanfare around its Apple ONE services bundle, “that big product line is hugely dependent on people continuing to buy Apple devices”.

With iPhone sales having been a bit lacklustre last year, Apple hopes the initial interest in its new 5G enabled models will have translated into higher sales and that the rise in working from home leads to ongoing demand for sales of Mac laptops and iPads.

“If they don’t that is likely to adversely affect the share price, given its high valuation,” says Streeter, also wondering if there might be an inkling of Apple’s progress in developing its own search engine.

Over at Tesla (NASDAQ:TSLA) Elon Musk has been as busy as usual this year, already reporting that the electric carmaker just missed his target of delivering half a million cars last year by a whisker, despite the pandemic, and in the past week kicking off sales in China of the new Model Y crossover, which is seen as being one of the next key growth steps.

With a 16% rise in the shares to US$845 so far this year, Musk has become the richest person in the world but how can a billionaire rest on his laurels when there are distant planets to be colonised?

Optimism is not just held by Musk’s legion of fanboys, there are also many fans on Wall Street, including analysts at US brokerages Oppenheimer and Wedbush, who recently hefted their price target on the stock to US$1,036 and US950, making what seemed like a bullish call by Morgan Stanley seem nerdily sensible.

Oppenheimer said it believes the company has “the potential to be a transformational technology company and deliver outsized returns”, with the crucial medium-term tests being the company’s execution on Model 3 and Model Y volumes, along with battery cost reduction.

For Wedbush, China holds the key to a bullish potential scenario that would command a target price of US$1,250. Consumer demand for electric cars in the People’s Republic surged last year and Beijing is looking to lift the proportion of EVs from the current 5% to 25% by 2025, although Tesla faces growing local competition from the likes of Nio Inc (NYSE: NIO), Li Auto Inc (NASDAQ:LI) and Xpeng Inc (NYSE:XPEV).

The attention of investors and Wall Street in Tesla’s Q4 numbers will be on profit margins and cash generation, says Nick Hyett at Hargreaves Lansdown, for some reason forgetting to mention the big issue of Tesla tequila. 

“Key questions are whether the group has been able to sustain the higher level of production without incurring additional costs, and whether average sales prices have fallen to stimulate demand,” he says.

“Also worth particular attention is any information relating to the sale of regulatory credits. The group earns credits from its zero-emission vehicles and then sells them to manufacturers of traditional combustion engine cars. With rivals upping their electric production the demand for these credits should fall over time – undermining a key source of cash for the company.”

There’s plenty of stuff coming in 2021 that Musk may also comment on during the analyst call on the day, including battery production, the Model Plaid launch and Tesla’s energy business. 

Facebook Inc (NASDAQ:FB) has seen its shares have come under pressure in recent days over its decision to ban outgoing US President Trump from its platform, following rival Twitter.

After Joe Biden and the Democrat’s blue wave, social media companies are expected to face tougher times, with members of the new administration and Republicans having publicly said that companies like Facebook need to be made accountable for what’s published on their platforms and regulated more tightly. 

Biden’s tech adviser, and his former chief of staff during his time as vice president, has been a keen advocate for tech reform in his years outside of government.

In December, major antitrust cases were filed against Facebook by the Federal Trade Commission and various states in regard to the company’s acquisitions of Instagram and WhatsApp.

However, though these are issues that will take years to play out, they may hit advertising sales and investor sentiment in the company.

Indeed, advertisers have already started to cut back spending on social media sites in the past few weeks, though this is not expected to show up in Zuck’s latest numbers, with earnings per share expected to come in at US$3.20.

While the company’s rationale on banning Trump “may well appear to make sense, it comes across as too little too late, from one side of the political divide, while on the other side of the divide it comes across overstepping the bounds of free speech,” said CMC’s Hewson.

The Facebook website and app has 33mln Trump followers, Bank of America analysts noted, raising the possibility that there could be some customer churn and “engagement risk” in the first quarter.

Wall Street analysts mostly think the company will be fine (https://www.investors.com/research/fb-stock-buy-now-facebook-stock/), with UBS reiterating a ‘buy’ rating and KeyBanc predicting the company will be fines rather than broken up.

Likewise, UK star investor Terry Smith is also a fan and this week he reiterated his support for what was a controversial purchase for his Fundsmith unit trust.

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