Yes, it is time for the main event. This afternoon, Apple (AAPL) will deliver December quarter results. After two years of a global pandemic, it feels a little off to say the tech giant reports amidst uncertain conditions, but nevertheless, that’s the general gist of things right now. Rising inflation, wobbly markets, geopolitical tensions, an ever-shifting virus. What’s next?
No one knows, but looking at the case of Apple, Morgan Stanley’s Katy Huberty has an idea of what lies in store.
Based on “improving iPhone production into year end and modest Services outperformance,” the analyst anticipates Apple will beat the Street’s December quarter estimates and post an “in-line guide” for March.
The analyst thinks the Street is underestimating the iPhone’s performance into last year’s final stretch. According to Huberty’s industry checks, 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.”
The firm’s weekly iPhone lead time tracker shows the average lead time for the iPhone 13 Pro and Pro Max dropped from 29 days at the start of the December quarter to 2-3 days by the end of the year. Additionally, the 5-star analyst thinks that the data indicates iPhone demand in “key markets such China was strong.”
That said, should Apple over deliver, Huberty thinks such a scenario appears “relatively priced in” by the market; despite the recent pullback, the shares have outperformed over the past few months. In any case, if the shares display any “further weakness” post earnings, Huberty says she would scoop them up in a hurry and notes several reasons why she views AAPL stock as a “more defensive/quality outperformer in challenging markets.”
The list includes a “1.65 billion+ installed base with high loyalty/retention rates, underweight institutional positioning, strong capital returns, and the tendency for Apple to outperform ahead of product cycles (iPhone SE3in April/May 2022, iPhone 14 in Fall 2022, and a MR Headset in 2023).”
Accordingly, ahead of the print, Huberty rates the stock an Overweight (i.e. Buy) and has a $200 price target for the shares. At current levels, this target suggests ~26% upside for the year ahead. (To watch Huberty’s track record, click here)
In general, the rest of the Street is on the same page. 22 Buy ratings compared to 4 Holds and 1 Sell, assigned in the last three months, give Apple a ‘Strong Buy’ analyst consensus. At the $181.40 average price target, shares could surge ~14% over the next twelve months. (See Apple stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
