Apple stock has rallied 19% since the stock’s Oct. 4 low.
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Apple reports December quarter earnings next week, and analysts have concluded that results are likely to be above current consensus estimates. (Which by the way is a little weird, since it implies that the Street thinks their own models are too conservative.) But in the current environment, a modest bottom-line beat might not provide much lift to Apple stock.
Morgan Stanley analyst Katy Huberty writes in a research note previewing next week’s report that she expects Apple (ticker: AAPL) to post modest upside to current estimates for the December quarter, with in-line guidance for the March quarter. (I’d note that Apple hasn’t provided detailed quarterly guidance since the start of the pandemic almost two years ago, although the company does generally provide some color on what to expect.)
In any case, Huberty thinks the market has already priced in her upbeat earnings scenario—she points out that the stock has rallied 19% since the stock’s Oct. 4 low. Nonetheless, she keeps her Overweight rating and $200 price target on Apple shares, asserting that “revenue stability, upcoming product launches and expansion into new markets” makes Apple a defensive pick in a rising-interest-rate environment. Huberty also notes that the stock is down 9% year to date through Wednesday, underperforming a 6% drop in the S&P 500 index—and advises she would be a buyer on any further weakness.
For the December quarter, Huberty sees revenue of $122.3 billion, and earnings per share of $1.97, ahead of the Street’s respective estimates for $118.3 billion and $1.89. She is particularly bullish on iPhone revenue, projecting $72.1 billion, above the consensus estimate for $68.1 billion. “Our checks indicate iPhone production likely surprised to the upside with fewer than expected manufacturing disruptions, allowing Apple to better meet holiday and upgrade demand for the iPhone 13,” she writes.
Huberty projects revenue of $7.7 billion for iPad, down 9%, and below the Street’s $8.2 billion estimate. She projects $9.6 billion in Mac revenue, up 10% and a smidge ahead of consensus; for wearables, she sees revenue of $13.8 billion, up 6%, but below consensus at $14.6 billion. For services, she sees $19.2 billion in revenue, up 2%, and ahead of consensus at $18.6 billion, driven in part by strong performance from the App Store.
The analyst says one key to the quarter will be any commentary on ongoing component shortages and delivery issues. “Management commentary on the status of the supply chain (including component shortages, manufacturing disruptions, and logistics challenges) will be important in helping investors understand at what point hardware supply and demand will become more balanced,” she writes.
For the March quarter, Huberty is projecting revenue of $90.8 billion, about in line with the Street at $90.7 billion, with profits of $1.31 a share, two cents below consensus.
Apple stock on Thursday was down 0.9% to $163 in Friday morning trading.
Write to Eric J. Savitz at [email protected]
