Morgan Stanley Says Apple Will Likely Beat FQ2 Revenue Estimates on iPhone 13 and Mac Strength; Sees Risk to FQ3 Numbers on China Lockdowns
2022.04.20 16:01
Morgan Stanley Says Apple (AAPL) Will Likely Beat FQ2 Revenue Estimates on iPhone 13 and Mac Strength; Sees Risk to FQ3 Numbers on China Lockdowns
Morgan Stanley analyst Katy Huberty is positive on Apple (NASDAQ:AAPL) ahead of the March quarter earnings report.
The analyst reiterated an Overweight rating and a $210.00 per share price target as the iPhone 13 and Mac strength is offsetting relative underperformance seen in iPad and Services.
“We expect Apple to post upside to March quarter consensus revenue estimates on the back of iPhone 13 and Mac strength, which we believe more than offset relative weakness in iPad and the App Store in the quarter. This view is supported by a quant analysis of Apple supplier data conducted in partnership with our AlphaWise colleagues, which points to March quarter revenue upside vs. current consensus estimates,” Huberty said in a client note.
On a more negative note, the analyst says that the management commentary is “likely to incorporate some caution as COVID lockdowns linger.”
“With COVID-related lockdowns currently spreading through major Chinese manufacturing hubs such as Shanghai, Kunshan, and Zhengzhou – albeit with limited impact to Apple production schedules to date – we expect Apple to take a more cautious stance when providing commentary on the June quarter given the unpredictable nature of potential future lockdowns.”
Along these lines, Huberty says that the current Street consensus for the June quarter of $86.7 billion “appears high.” The analyst expects Apple to suggest a “below consensus trend, closer to our $83.3 billion estimate.”
Morgan Stanley’s more conservative estimate for the FQ3 takes into account “lower April production/factory utilization and recent iPhone SE3 build cuts.”
Huberty adds that Apple could outperform these forecasts, however, the company is still likely to set a lower bar.
“With this setup, we don’t believe investors need to be aggressive ahead of the quarter; however, we’d continue to buy shares on any weakness as we expect Apple to remain an outperformer in this more challenging market, similar to outperformance in past late economic cycles, given its strong brand, product/services innovation, and recurring purchases from higher-end consumers, which keeps Apple relatively more insulated from macro factors,” Huberty added.
Strong buyback activity will continue to offer support to AAPL stock while the launch of iPhone 14 in the fall of 2022 and AR/VR glasses in early 2023 are set to act as key catalysts for shares.
Apple stock is up 0.8% in pre-open Wednesday.
By Senad Karaahmetovic
