Apple’s revenues are due Tuesday. Why the market can already look beyond them. – .

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Apple’s revenues are due Tuesday. Why the market can already look beyond them. – .



Apple
stocks recently hit new all-time highs amid increased investor expectations for the June quarter earnings expected after the closing bell on Tuesday. But it’s the launch of the next generation iPhone, due to be unveiled in September, that could be the real difference factor.

Apple’s recent rally hasn’t erased concerns about the title. The growing regulatory scrutiny of Big Tech in general and Apple (ticker: AAPL) in particular, with particular emphasis on the fees Apple charges to developers who distribute apps on the company’s App Store for iPhones, iPads and Macs, is obvious. Difficult year-to-year comparisons are also raising concerns, and some investors fear that recent growth in Mac and iPad sales may slow as the economy returns to more normal conditions. Others fear that the next series of iPhones will only bring incremental improvements, and this demand could disappoint.

But no one seems to worry too much about the income itself. The Wall Street consensus for the third fiscal quarter is $ 72.9 billion in revenue and $ 1 earnings per share. Even cautious analysts on the stock think these numbers are too low. For example, BofA Global Research analyst Wamsi Mohan forecasts revenue of $ 77 billion, with earnings of $ 1.05 per share, thanks to the strength of the entire hardware portfolio of the company. Mohan, however, still has a neutral rating and a price target of $ 160 on the stock, and warns that the company will face some tough comparisons in the coming quarters given spikes in Mac and Mac sales. iPad during the pandemic.

He scores a point. In the March quarter, Apple’s sales jumped 54%, driven by strong growth across the portfolio, with sales increases of 66% for iPhone, 70% for Macs, 79 % for iPads, 25% for portable devices and 27% for services. Street consensus estimates for the June quarter predict $ 34.2 billion in iPhone sales, $ 7.2 billion for iPads, $ 7.9 billion for Macs, 7.8 billion $ 16.3 billion for wearable devices, home and accessories; and $ 16.3 billion for services.

The company did not provide detailed guidance for the quarter, but warned that sales could be slashed by $ 4 billion due to tight supply of Macs and iPads linked to component shortages.

Still, Wedbush analyst Dan Ives believes Apple is heading for a different overall pace, driven by continued strong demand for the iPhone 12, with particularly strong demand in China. “While the chip shortage was an overhang for Apple during the quarter, we believe the strength of the iPhone and services during the quarter neutralized any near-term weakness the streets anticipated three months ago.” , writes Ives. The analyst says Apple remains its preferred large-cap tech pick, with a “1-2 punch” of services and demand for the iPhone. He believes the company can reach the market capitalization level of $ 3 trillion in 2022, up from just under $ 2.5 trillion today. Ives maintains his outperformance rating and target price of $ 185.

Canaccord analyst T. Michael Walkley also raised his buy rating on Apple stocks, while raising his price target to $ 175 from $ 165. He also expects the June quarter results to beat Street’s estimates. An interesting question is whether Apple will return to providing quarterly advice, a practice the company has put on hold during the pandemic. If so, says Walkley, expect the forecast to beat Street’s current forecast.

“Apple is well positioned to continue to benefit from the 5G upgrade cycle, and we anticipate strong growth trends overall as 5G smartphones increase and its installed base grows with higher margin service revenues. He writes. “Apple’s ecosystem approach, including an installed base that exceeds 1.65 billion devices worldwide and now more than one billion iPhone users, is expected to continue to generate strong service revenues. “

But the big news may still be coming. After the company rolls over past earnings, Apple investors will focus on launching the iPhone in the fall. (Let’s call it iPhone 13, although Apple didn’t specifically name the new line.) Ives sees incremental improvements, including Lidar capability in all phones, which will improve their usefulness for augmented reality applications. Even more important is his observation that around 250 million of the installed base of nearly one billion iPhones are at least 3.5 years old and in need of an upgrade.

As Morgan Stanley’s Katy Huberty noted, Apple stocks tend to outperform the market before new phones launch. There is no reason to think this year will be any different. Expect a strong June quarter from Apple, with higher highs likely as fall approaches.

We can re-evaluate after that.

Write to Eric J. Savitz at [email protected]

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