It’s shaping up to be a big week for Apple (AAPL). The tech giant reports fiscal Q3 earnings on Thursday, July 30, but beforehand, there is the matter of an antitrust hearing. Today, CEO Tim Cook – along with his counterparts at Facebook, Google, and Amazon – will testify before Congress. The hearing is part of an investigation to determine if the tech leaders wield too much power, resulting in a market skewed in their favor and devoid of competition.
Specifically, in Apple’s case, the hearing concerns the company’s App Store, where it has been alleged Apple’s rules for third party developers differ from those given to Apple’s own developers, therefore providing Apple with a competitive advantage.
What implications the hearings will have are unknown, but for Wedbush analyst Daniel Ives, Apple’s competitive advantage is based on the upcoming 5G cycle, and particularly, the launch of the iPhone 12 – its first to boast 5G capabilities.
The launch is expected to take place in the fall and serves as the “linchpin” for Ives’ bull case. Ives estimates that approximately 350 million of Apple’s 950 million iPhones across the globe are due for an upgrade during this cycle, of which 60 to 70 million will be sold in China – “a key ingredient in Apple’s recipe for success” – over the next year.
As for this week’s main event – Thursday’s earnings report – Ives expects Apple to outperform. Boosted by the increasingly important Services business, the analyst believes the giant from Cupertino will beat the Street’s calls for revenue of $52.1 billion and EPS of $2.04.
The 5-star analyst said, “With bullish sentiment swirling around Apple’s stock, we continue to believe investors are viewing headline June results with a grain of salt given COVID, supply chain, and macro pressures around iPhone sales with all the focus on services strength and a rebound trajectory in the key China region heading into the Fall.”
To this end, Ives keeps his Outperform (i.e. Buy) rating as is and attaches a $450 price target, suggesting there’s room for a 21% uptick in the year ahead. (To watch Ives’ track record, click here)
Among Ives’ colleagues, Apple has a Moderate Buy consensus rating, based on 26 Buys, 5 Holds and 2 Sells. However, with an average price target of $376.26, the analysts think AAPL is liable to remain range bound for now. (See Apple stock-price forecast on TipRanks)
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