While the market is still digesting the impact of Microsoft and Alphabet’s disappointing Q3 reports, after the trading action closes today, the spotlight will shine on the only company boasting a bigger market cap than either.
Apple (AAPL) will deliver its F4Q (September) results against a backdrop of worrying macro trends which have badly affected the other tech giants.
Accounting for the current macro environment, Deutsche Bank analyst Sidney Ho expects cautious commentary from Apple around demand, believing the company’s “qualitative revenue guidance” for the December quarter (F1Q) could be “below” the firm and the Street’s estimates.
“That said,” Ho went on to add, “we do think the slower growth is already anticipated by the market, especially given recent media reports suggesting AAPL is cutting iPhone orders and that the stock has pulled back ~20% from its August peak.”
Additionally, the current environment provides an opportunity for Apple’s strong balance sheet to “shine,” what with its dividend payments and annual share repurchases of $100 billion+.
The “key areas” Ho will be keeping an eye out for are demand trends among consumers, FX headwinds, how the supply-chain is progressing and the “sustainability of growth” of its Services business. Here, the company has already said it expects revenue to slow down from the 12% uptick of F3Q. Ho sees the segment gaining 10% year-over-year, but warns that due to further headwinds from FX and digital advertising, there’s “potential for downside.”
All in all, Ho calls for F4Q revenue of $88.5 billion (a 6% y/y increase and up 7% sequentially) and EPS of $1.26. The Street has $88.7 billion and $1.26, respectively.
“With investor expectations already low heading into earnings and the stock trading at a reasonable valuation (at ~22x CY23E EPS),” Ho summed up, “we believe the risk-reward profile is attractive.”
Accordingly, Ho reiterated a Buy rating on Apple stock backed by a $175 price target, indicating potential growth of 19% in the year ahead.
The Street’s average target is slightly more bullish than Ho will allow; at $183.37, the figure makes room for 12-month gains of 25%. Rating wise, based on 23 Buys against 4 Holds, the consensus view is that Apple is a Strong Buy. (See Apple stock forecast on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
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.
