Next week will be marked by several tech giants delivering their latest quarterly reports, not least the biggest of them all Apple (NASDAQ:AAPL). The tech giant will deliver December quarter (F1Q24) results on Thursday, February 1, after the markets close.
Looking ahead to print, Evercore’s Amit Daryanani, a 5-star analyst rated in the top 3% of the Street’s stock pros, highlights that China continues to be a major concern for investors. However, he is optimistic about the potential for iPhone revenue stability in both December and potentially March, thanks to emerging market share gains and an uplift in average selling prices in developed markets.
Investors are also worried about growth in the Services segment, although boosted by an uptick in the Google payment and the App store maintaining double digit growth, Daryanani thinks high single/low double digits growth should be achievable.
As for the Apple Watch, a ban imposed by the ITC on the Apple Watch Series 9 and Ultra 2 models became active at the end of December while Apple appeals a verdict regarding its infringement of patents registered by another company. But as it was only in effect for less than a week and likely did not have a meaningful impact on sales, Daryanani expects “minimal impact” from the Watch ban. Additionally, on the back of a couple years representing a post-COVID hangover, the iPad and Mac should “start seeing better trends.” Anti-Trust issues are also a hot topic amongst investors, but Daryanani does not expect Apple to comment on the subject on the earnings call.
As far as the outlook for the March quarter is concerned, on average, historically, the tech giant has guided for margins to be flat to down 50bps, but gross margins could be a “wild card” here (street is factoring GMs staying flat sequentially in the March quarter), should the forecast suggest they will stay at current record high levels, and could be an “upside driver.” Based on strong services mix in addition to “strength in the very high margin Google payment,” that is certainly achievable, says the 5-star analyst.
“Net/net,” Daryanani summed up, “We maintain our bullish stance on Apple and think buyside expectations are likely below current consensus, so an in-line quarter would likely drive upside, especially if Apple can point to continued solid iPhone performance in China.”
As such, the analyst maintained an Outperform rating and based on the catalyst anticipated from the December quarter earnings, he added a “Tactical Outperform” to that. Daryanani’s $220 price target suggests shares will post growth of ~13% over the coming months. (To watch Daryanani’s track record, click here)
Elsewhere on the Street, the stock claims an additional 22 Buys, 8 Holds and 1 Sell, for a Moderate Buy consensus rating. The average target currently stands at $203.19, implying the shares will show upside of a modest 4% a year from now. (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.
