Shares of Apple (NASDAQ:AAPL) have soared this year, even as the company suffered temporary supply shortages and store closures. The stock is up 27% year to date and 80% over the past 12 months. This crushed the market's returns. The S&P 500 fell 0.4% and rose 6%, respectively, over these same time frames.
With such strong stock performance in the rearview mirror, there's a lot of pressure on Apple to deliver some solid results when it reports earnings this week. Ahead of the tech company's fiscal third-quarter results this week, here's a preview of some key areas investors will want to check on.
Can Apple grow its top line?
Investors will be paying particularly close attention to Apple's reported quarterly revenue.
When Apple reported its fiscal second-quarter results, management opted not to provide any revenue guidance for fiscal Q3, citing a "lack of visibility and certainty in the near term" as the company and the global economy worked through the depths of the coronavirus pandemic.
Analysts, on average, are expecting Apple's total revenue to fall 3.1% year over year during the period, to $52.1 billion. Revenue growth, therefore, is unlikely. But a stronger-than-expected top line may be what it takes for the company to keep investors willing to pay the premium they are paying now for this stock.
How is the iPhone SE faring?
One bright spot in Apple's fiscal second-quarter update was how customers were responding to the company's launch of its new iPhone SE -- an iPhone with a much lower price tag than its flagship 11 and 11 Pro iPhones.
Apple launched the new iPhone before its fiscal second-quarter update but after the period ended. This means any strong incremental sales from this new iPhone will show up in fiscal Q3 -- the quarter the tech company is about to report.
"I have seen a strong customer response to iPhone SE," said Apple CEO Tim Cook in the company's fiscal second-quarter earnings call. Highlighting the phone's potential to drive incremental revenue for Apple, Cook said that many of the customers buying the phone were switching from Android devices.
Will services growth accelerate?
Investors will also likely pay close attention to any news regarding Apple's second-largest segment: services.
Most of this business likely benefited from consumers sheltering at home. App sales and subscriptions, for instance, likely jumped as people all around the world became more reliant on virtual activities in light of store closures and social distancing measures.
But one area of Apple's services business likely took a big hit: advertising. Given the uncertain environment for retailers, marketing budgets likely contracted and potentially led to a year-over-year decline in ad spend across Apple's platforms.
Nevertheless, investors should look for continued strong double-digit growth from services in fiscal Q3, as accelerated tailwinds in the company's App Store purchases and subscriptions will likely offset the impact of headwinds in digital advertising.
Apple's services revenue rose 17% year over year in fiscal Q2. Look for similar growth in fiscal Q3.
It's quite possible that Apple may refrain from providing guidance once again since these are very uncertain times. However, if management does opt to provide guidance for the fourth quarter of fiscal 2020, the figure to beat is $62 billion; this is analysts' average estimate for the period. This would translate to a 3.2% year-over-year decline in quarterly revenue for the period.
Apple reports its fiscal third-quarter results after market close on Thursday, July 30.