Your cheat sheet for Apple’s earnings report

Tech behemoth Apple Inc (NASDAQ: AAPL) will report fiscal second quarter results after Wednesday’s market close. Apple’s stock continued momentum after an already strong 90% year-over-year return is contingent on an impressive report.

Here is a summary of what one expert is looking for in the report.

The iPhone ‘supercycle’

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The iPhone 5G refresh “supercycle” that was introduced in late 2020 represents a key event that investors have been excited about for a long time, Wall Street Journal reporter Tim Higgins said on CNBC’s “The Exchange.” But the pressure will be on for Apple to reassure investors the back half of 2021 will show continued momentum.

Investors will be measuring how “excited” Apple CEO Tim Cook is surrounding the end of the year, Higgins said. Given Apple’s market capitalization of $2.25 trillion, there is “little room for error” across any front.

Are pandemic trends durable?

Investors that lowered their exposure to tech stocks in recent weeks amid expectations for a rebound in re-opening plays and infrastructure stocks will also be looking for a reason to support their decision.

Apple has increased sales of its devices amid the COVID-19 pandemic as people had little to no choice but to work more productively and efficiently from home. This resulted in Apple generating new sources of revenue in ways that investors had never expected.

But as the US and global economies continue to reopen, it is not yet clear if prior trends will hold out and consumers will buy gadgets at the same rate as recent months , Higgins said. By contrast, fellow tech giant Alphabet Inc (NASDAQ: GOOG) stands to benefit as a reopening play as companies look to ramp up advertising spend.

“And that’s where I think investors’ minds are today with Apple — what’s that new world going to look like for Apple,” he said. “And Tim Cook is going to be under pressure to [answer].”

Legal spat, iOS update

Apple’s near-term headlines will focus on two other events aside from Wednesday’s report. The first is Apple’s defense against video game company Epic that alleges monopolistic behaviors.

The legal spat with Epic that starts in early May could take “many years” before it makes its way through the legal system, Higgins said. 

The second is the iOS 14.5 update that features what some describe as questionable privacy concerns.

But the most important near-term event for Apple is “what’s the next big thing” that will become apparent over the next six months, Higgins said.