Earnings season is in full swing, and Wall Street is waiting in anticipation for some of the world’s biggest companies to enter the fray and deliver their latest quarterly statements.
Make sure to mark your calendars for next Thursday, February 1st, as Apple (NASDAQ:AAPL), the world’s most valuable company by market cap, is poised to reveal its fiscal 1Q24 earnings for the December quarter.
But hold on, Bernstein analyst Toni Sacconaghi warns that investors should prepare for a potentially lackluster performance.
“Q1 guidance pointed to a weak iPhone 15 cycle, with company revenue up 32.7% compared to Q4, among the weakest in history, despite improved iPhone supply,” the analyst said. “While services is likely to continue to see strong growth (we forecast 12.9%), we believe that Apple’s other product categories will also be weak.”
As for the headline numbers, Sacconaghi’s estimates for the quarter are actually a tad higher than the Street’s; he is calling for revenue of $119 billion and EPS of $2.16 vs. consensus at $118 billion and $2.11, respectively.
However, it’s for the current quarter where Sacconaghi’s take sours. For FQ2 (March quarter) and the rest of the year, the analyst thinks consensus is “mis-modeling iPhone seasonality,” and sees Apple facing some problems. For a second consecutive year, Sacconaghi thinks the tech giant will have a hard time growing revenues and predicts -3% iPhone growth and 0.3% overall revenue growth for FY24. “We also believe that Vision Pro will provide limited upside in the near term,” he went on to say. “China market pressure and gross margins/ASPs are also key issues for the quarter.”
One major point of discussion revolves around the fact investors appear to already be considering this iPhone 15 cycle as a weak one, and whether expected tepid results and guidance are “already priced in.”
That, says Sacconaghi, would represent a similar scenario to the iPhone XS and 14 cycles, where from the Q1 results onwards until the end of the year, Apple outperformed in a meaningful way.
“While possible,” says the analyst, “unlike the XS and 14 cycles, AAPL has performed in-line since the iPhone 15 launch, and trades at a much higher multiple than either prior cycle.”
To this end, Sacconaghi rates Apple shares a Market Perform (i.e., Neutral), while his $195 price target suggests the stock is currently fully valued. (To watch Sacconaghi’s track record, click here)
The Street’s average price target is only slightly higher; at $203.19, the figure makes room for 12-month returns of a modest 4%. Rating wise, with 23 Buys, 8 Holds and 1 Sell, the stock claims a Moderate Buy consensus rating. (See Apple stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
