Apple & Facebook – Out of the park.

Both Apple and Facebook smash expectations.

Apple FQ2 2021 – the last of the stay at home

• Apple reported FQ2 2021 results that blasted through estimates as the work and learn from home trend continued to underpin demand for its productivity products which was also supported by a solid performance from the iPhone.
• FQ2 2021 revenues / EPS were $89.6bn / $1.40 easily beating estimates of $76.9bn / $0.99 but the company was more circumspect with regards to its outlook.
• Pandemic-related uncertainty has caused Apple to avoid giving guidance in recent quarters, but it did say that the semiconductor shortage would take up to $4bn off revenues in the coming quarter.
• This sentiment is being echoed everywhere with Ford, BMW, Honda, Jaguar Landrover & Mitsubishi all briefly pausing production.
• Due to its size and volumes that it orders, Apple will get priority and so a 3-4% hit to revenues is about the best that anyone can expect for the coming quarter.
• The real strength in Apple’s quarter was both iPads and Macs which is in line with commentary from Intel, AMD, Microsoft, and Samsung.
• iPads generated $7.8bn in revenue compared to forecasts of $5.7bn while Macs generated $9.1bn compared to forecasts of $6.8bn.
• Apple also stated that Mac demand was driven by the new M1 processor which has substantially improved both the performance and battery life making Macs much more attractive to buyers.
• This is a credible claim as its new M1 products have held up extremely well when reviewers compared reality to the claims that Apple made at launch.
• The outlook for Apple remains pretty good but I continue to think that the share price already reflects this given the modest bounce following such excellent results.
• I remain pretty indifferent to this one.

Facebook FQ2 2021 – Price inflation

• Facebook reported excellent results as both volume and pricing for digital advertising underpinned revenues but it is important to remember that the comparisons to Q1 2020 are pretty easy given how hard the business was hit last year.
• Q1 2021 revenues / EPS were $26.1bn (up 48% YoY) / $3.30 compared to forecasts of $23.7bn / $2.34 per share.
• MaU’s also bumped up registering 10% YoY to 2.85bn while use of the whole ecosystem (Facebook, Instagram, WhatsApp) on a daily basis jumped by 15% YoY to 3.45bn.
• Nearly half of the planet engages with one of Facebook’s properties on a daily basis giving it arguably the largest reach of any of the major digital ecosystems.
• YoY growth is expected to remain the same in Q2 2021 given how weak Q2 2020 was, but this will then slow materially in H2 2021 as the comparisons become much more difficult.
• Pricing was a major factor in driving the better than expected revenues as in Q1 2020, pricing was severely depressed due to soft demand.
• This combined with the jump in online commerce is what drove pricing to increase by 30% YoY which is where most of the revenue beat came from.
• The only cloud in on the short term horizon is Apple’s move to change the privacy settings for its new version of iOS 14.5.
• In order to track users, Facebook now has to ask users for their permission and with no real incentive to say yes, almost everyone is expected to decline.
• Facebook will still be able to use the data that users input directly into its apps but anything else will now be off-limits without permission.
• The degree to which Facebook has fought this decision demonstrates just how much impact it might have on the company, but Facebook did say that it has developed a number of strategies for marketers to help them mitigate the effect.
• Compared to its peers, Facebook trades broadly in-line, but these results will give both forecasts and the share price a lift.
• I am also pretty indifferent to this one.