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Apple Good for Portfolio Health, Thinks Street

Despite a few hiccups, Apple’s (AAPL) near-term outlook looks bright. The company is poised to benefit significantly from new 5G-enabled iPhones, upcoming revamped iPad and Mac devices, and a fast-growing App Store ecosystem.

Ahead of its fourth quarter of fiscal 2021 (Q4F21) earnings, Monness Crespi Hardt analyst Brian White reiterated a Buy rating on the stock, with a price target of $184. “We believe the successful creation of a strong services business has provided the market with more confidence in the company’s long-term business model. Moreover, Apple has continued to expand its product portfolio and work on a pipeline of new innovations,” he explained. (See Analysts’ Top Stocks on TipRanks)

White further notes that the COVID-19 crisis has decreased the risk appetite of investors and tilted them more in favor of “large, well-managed, tech companies with strong balance sheets that benefit from digital transformation, such as Apple.”

Moreover, White contends that the pandemic is likely to have increased Apple’s installed base, which should be beneficial for the company in terms of future upgrade cycles, as existing users are deeply rooted in Apple’s digital ecosystem.

However, White warns investors of certain headwinds that are expected to persist over the forthcoming quarters. “Apple must contend with the vicissitudes of the supply chain, the hangover effect of the work-from-home movement (e.g., Mac, iPad), the changing economics of the App Store, the escalating war against Big Tech, and growing questions about the company’s commitment to privacy,” he cautioned.

Nonetheless, the analyst is optimistic about Apple overall. He expects the company to report Q4F21 revenues of $87.52 billion, which is more than the Street consensus estimate of $84.79 billion. White also projects earnings per share of $1.29, above the Street estimate of $1.23.

It is important to recall here that Apple did not provide official revenue guidance for Q4F21, due to the pandemic-induced uncertain environment. However, management did mention that it anticipates double-digit revenue growth year over year, but that the growth rate is likely to be lower sequentially, taking into account foreign exchange headwinds, normalized growth in the Services segment, and persistent supply constraints, primarily affecting iPhone and iPad. This gives us a fair picture of how the quarter has been for Apple.

The analyst consensus also resonates with the analysts’ optimistic stance on Apple, with a Strong Buy rating, based on 19 Buys and 6 Holds. The average Apple price target of $169.64 indicates an upside potential of 14%.

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Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.

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