“Apple investors focus will be squarely on Q4 guidance.”
From a note to clients by Bernstein analyst Toni Sacconaghi that landed in my inbox Tuesday:
While the street appears to be increasingly factoring in a delay for iPhone 8 and weak Q4 guidance, we note that only about 1/5 of analysts have lowered numbers for Q4, and we see the possibility that Apple could guide Q4 revenues $6B – $10B below cons estimates (we are at $42.7B vs. $50.4B), if there are delays with iPhone 8, which appears increasingly likely. We also encourage investors to monitor GM guidance, given the continued rise in NAND prices during the quarter and potential for a negative mix shift if the flagship iPhone 8 is delayed.
So will (potentially very) weak Q4 guidance matter? In our opinion, no – *unless* iPhone 8’s availability is pushed out past early November, in which case we believe that Apple could see incremental switchers away from iPhone, potentially undermining FY 18 numbers. A key question is what Apple might say on its conference call in the face of weak guidance.
Maintain Outperform rating and raise target price to $170 from $160.
Note: Sacconaghi is, for my money, one of the smartest Apple analysts on the Street. Last Earnings Smackdown he finished 10th out of 27. See Best and worst Apple analysts, Q2 2017 edition.