Apple delivered stronger-than-expected FY3Q (CY2Q20) results with EPS of US$2.61 (+19% YoY) and revenue of US$59.7bn (+11% YoY), which are 26% and 14% ahead of consensus, driven by strong cycle of iPhone 11, launch of cheaper iPhone SE and Mac/iPad demand boosted by WFH trend. Looking ahead into FY4Q, mgmt. expected strong growth across all products, and also confirmed iPhone supply to delay for a few weeks (vs late Sep last year), which is fully reflected in share price in our view. We continue to favor Apple supply chain over Android camp given upcoming 5G iPhone cycle and AirPods/ Watch momentum. We reiterate Buy on Luxshare for AirPods/ Watch strength, BYDE for share gain in iPad/Watch, and FIT Hon Teng for 2H iPhone recovery.
- Strength across iPhone/iPad/Mac despite pandemic; iPhone 12 delay as expected. Key highlights from earnings call include 1) iPhone revenue rebounded 2% YoY (vs -7% in FY2Q) driven by iPhone 11 cycle, cheaper iPhone SE and store reopening, 2) China/Japan returned positive sales growth of 2%/22% YoY (vs -7%/-6% in FY2Q), 3) strong Mac/iPad (31%/22% YoY) boosted by WFH demand, despite inventory shortages, 4) solid Service growth (+15% YoY) continued, 5) no FY4Q guidance in-line, and 6) iPhone 12 launch to delay for “a few weeks” as anticipated given supply chain disruption.
- Expect strong 5G iPhone cycle in 4Q20-1H21E. Mgmt. comment on new iPhone delay is in-line with our earlier view that production will be delayed by around one month given supply chain disruption in China. We anticipate four new 5G iPhones this fall: a 5.4’ OLED model (dual-cam), a 6.1 OLED model (dual-cam), a 6.1’ OLED model (tri-cam + LiDAR) and 6.7’ OLED model (tri-cam + LiDAR). We estimate iPhone shipment will decline 12% YoY in 3Q20E and then rebound 1%/36% YoY in 4Q20E/1Q21E.
- Accumulate ahead of iPhone launch; Prefer Luxshare, BYDE and FIT Hon Teng. Overall, we remain positive on Apple plays over Android names given upcoming iPhone cycle and AirPods/Watch momentum. We believe 5G model launch delays are largely priced in, and supply chain recovery will be boosted by channel restocking ahead of iPhone launch. We reiterate Buy on Luxshare given AirPods leadership and iPhone OEM biz, BYDE for share gain in iPad/Watch and FIT Hon Teng for 2H recovery. We also believe AAC Tech will benefit but maintain Hold for rich valuation.
