Stock Analysis & Ideas

Can Apple Pull a Rabbit Out of Its Hat This Earnings Season? Analyst Weighs In

It’s well-known by now, Apple’s (NASDAQ:AAPL) December quarter was marred by serious headwinds to its iPhone supply chain caused by the production disruptions in Zhengzhou, China.

As such, ahead of the tech giant’s first quarter of fiscal 2023 results (December quarter – slated for February 2), Monness analyst Brian White anticipates iPhone revenue will fall into “negative territory” following 8 consecutive quarters of growth; White expects iPhone sales to drop by 5% year-over-year to $67.93 billion. The analyst also thinks that given the “pent-up demand” seen in the prior quarter, Mac revenue will also slip by 9% from the same period last year to $9.86 billion. However, those declines will be somewhat countered by gains in Services, iPad and Wearables, Home & Accessories revenue.

All in, for the quarter, White anticipates Apple will “meet” his forecast for revenues of $123.03 billion – amounting to a year-over-year decline of 1% – and his EPS estimate of $1.99. Both are a touch higher than the Street’s call for $121.91 billion and $1.95, respectively. White’s estimate factors in a 36% sequential revenue uptick, which is lower than the four-year average of 50% quarter-over-quarter growth for previous December quarters.

One quirk that might play into Apple’s hands for this report is that the quarter had 14 weeks rather than the normal 13 weeks, an event that only happens once in roughly six years. “Although Apple flagged this extra week on its 4Q:FY22 call,” the 5-star analyst notes, “we doubt its impact is fully appreciated, representing a potential lever to partially offset the Zhengzhou disruption.”

Looking ahead, White is calling for 2QFY23 sales of $96.72 billion (also representing a 1% y/y decline), and EPS of $1.46. The consensus estimates stand at $98.46 billion and 1.50, respectively. While White thinks Apple will benefit from “pent-up iPhone demand” following the Zhengzhou issues, he also anticipates that will be offset by consumers becoming “more frugal” in 2023.

Overall, White reiterated a Buy rating along with a $174 price target, suggesting the shares will climb ~29% higher in the year ahead. (To watch White’s track record, click here)

Overall, 27 analysts have chimed in with AAPL reviews over the past 3 months and these come in 22 to 5 in favor of Buys over Holds, resulting in a Strong Buy consensus rating. At $173.37, the Street’s average target is almost identical to White’s objective. (See Apple stock forecast)

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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.

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