Excerpts from the notes I’ve seen. More as they come in, new notes up top.
Matthew Cabral, Credit Suisse: Delivering against a lofty bar. The upside was broad-based across the Product portfolio, with all categories posting y/y growth despite ongoing COVID headwinds. Looking ahead, Apple did not provide explicit Sept-Q guidance (as expected) citing ongoing uncertainty, though did provide color by segment including iPhone (recent performance to continue on existing lineup, though with a “few weeks delay” that pushes the upcoming launch into Oct). Neutral. Raises target to $380 from $340.
Wamsi Mohan, Merrill Lynch: Ten reasons to buy the stock post earnings. (1) Product revenue growth despite COVID-19 related store closures and stay at home orders during F3Q reaffirms our confidence in installed base stickiness, (2) stimulus benefit shows continued price elasticity of demand for iPhones, (3) new iPhone delay creates weakness in Sep but upside to the Dec qtr, (4) mgmt. expects strong non-iPhone product performance to sustain into F4Q, (5) iPad and Mac installed bases attracting new users and growth continues to outperform expectations (6) Services grew slower than anticipated but margins have upward bias, (7) Apple saw new all-time revenue records in the App Store, Apple Music, Video, and Cloud services. (8) capital returns strong (returned $21bn to shareholders in C1Q with $15.9bn in buybacks, $3.7bn in dividends), (9) Apple announced a 4 for 1 stock split, (10) balance sheet remains solid with net cash of $81bn and strong free cash flow generation. We expect upside to come from sustained growth and continued multiple expansion. Buy. Raises target to $420 from $410.
Katy Huberty, Morgan Stanley: The Ecosystem Strikes Back. Despite COVID-19 headwinds, Apple grew revenue in every segment and geography, beating consensus revenue by 14% as ecosystem engagement rises. We expect these trends to continue, supporting our above consensus FY21 estimates which increase by 1-3%… We remain bullish on 1) accelerating iPhone growth due to extended replacement cycles, the upcoming new 5G line-up, and improved affordability with the launch of the 2nd gen iPhone SE and financing / trade-in programs, 2) increased importance of consumer computing devices to support work, play and learn from home benefitting iPad/Mac sales, and 3) higher engagement with digital services, which offsets temporary pressures in AppleCare and ad-based revenue. Flowing these dynamics through our model drives FY21 revenue and EPS up 3% and 1%, respectively. Overweight. Raises target to $431 from $419.
Kyle McNealy, Jefferies: Clear Path to the 5G Cycle. The company is navigating this uncertain time exceptionally well. Importantly, the strong June quarter results and September guidance de-risk the near-term uncertainty associated with the pandemic and the last two quarters of 4G before the 5G cycle. This is significant, in our opinion. We get the sense investors were heading into this quarter expecting to have to look past near-term volatility to the 5G cycle that’s a few quarters away. Now there’s a much clearer path to 5G, which we expect to start in late October for Apple. Buy. Raises target to $465 from $405.
Tim Long, Barclays: Equal weight. Raises target to $400 from $326.
Jim Suva, Citi: Buy. Raises target to $450 from $400.
Tim Arcuri, UBS: Buy. Raises target to $425 from $400.
Daniel Ives, Wedbush: Cupertino Delivers a Picasso-Like Performance; Raising PT to $475. With iPhone 12 now slated likely for the early October timeframe, the stage is set for the supercycle to begin for Cook & Co. as we believe this is Apple’s biggest product cycle since iPhone 6 in 2014. Outperform. Raises target to $475 from $450.
Rod Hall, Goldman Sachs: Large WFH/SFH driven beat, confirmed iPhone delay. We see this as a very strong quarter for Apple as consumers and institutions are clearly spending even more than we had anticipated to support both work from home and study from home. In hindsight, we also likely underestimated the short-term impact of stimulus and disposable income freed up by the lack of spending on things like entertainment and gas. The iPhone SE also seems to have driven unexpectedly strong unit demand though we believe ASPs, if we could see them, would be lower than we had forecast. While we had increased our numbers heading into this print and flagged a likely solid quarter it turns out that we and consensus weren’t even in the ballpark in terms of what was possible. As we had indicated in our preview we continue to believe that caution is warranted looking into 2021 as our earnings forecast remains well below consensus. However, we equally believe this is a quarter to give Apple credit where credit is due for excellent execution and performance in the midst of unprecedented difficulty. Raises target to $314 from $299.
Tom Forte, Davidson: Strong Growth Across the Portfolio. Apple saw strong traction across product categories. The return of iPhone growth was primarily driven by a strong iPhone SE launch, continued economic stimulus globally, and some loosened restrictions on shelter-in-place orders. Growth for iPads and Macs accelerated (31% and 22%, respectively), as consumers turned to Apple for remote work, learning, and entertainment. Buy. Raises target to $480 from $355.
Samik Chatterjee, J.P. Morgan: Can’t Keep Them Down: Upside on iPhone Sales Despite COVID Reinforces Demand Drivers. Apple surprised even bullish expectations heading into F3Q/C2Q earnings by hardly missing a beat, even as several disruptions impacted its ability to operate retail stores successfully during the quarter… All in all, Apple’s ability as a company in a consumer discretionary product segment to completely buck sequential slowdown in F3Q/C2Q despite the massive disruption speaks volumes to the utility associated by consumers to the products as well as the momentum of a product cycle, which is leading them to be willing to circumvent the traditional practice of buying from the physical channel when required, and leads us to be more optimistic relative to the upcoming 5G product cycle. Our estimates move up materially, most notably for iPhone sales. Overweight. Raises target to $460 from $425.
Gene Munser, Loup Ventures: Apple Is Poised to Reaccelerate and Sustain Growth. We were expecting the Apple’s June quarter numbers to be noisy, magnified by the pandemic. We were wrong. Apple’s June quarter results clearly outpaced expectations on iPhone, Mac, and iPad (67% of revenue). The numbers reveal a company that is best positioned among big tech to reaccelerate revenue growth over the next year and sustain that high growth for the following two years. Beyond the multi-year 5G cycle, Apple has dependable revenue tailwinds from products that tap into long-term undeniable growth movements including digital health, working and learning from home, services, and autonomy.
Yung Kim, Piper Sandler: No Guidance…No Problem: Fundamentals Set in Stone. Apple reported solid June quarter results, handily beating consensus estimates. Similar to last quarter, the company did not provide September quarter guidance given the coronavirus uncertainty and variability in operations. In our view, the most notable item in the June quarter results was the business holding up extremely well, with the pandemic having little impact on the core business. For example, iPhone revenue was up 1.7% Y/Y, while both Mac and iPad benefited from the work from home/learn from home phenomenon. Going forward, next fiscal year appears to be a banner year for Apple, as the company will benefit from the delayed 5G iPhone launch falling into the December quarter. On the flip side, we are expecting a typical September launch for the 2021 iPhone models. All in all, we are raising our estimates nicely. Overweight. Raises target to $450 from $310.
Amit Daryanani, Evercore: Don’t Get Altitude Sickness (YET). While AAPL refrained from providing an explicit Sept-qtr guide – management noted they expect the iPhone refresh to be delayed by a few weeks which would effectively push iPhone demand from Sept to Dec-qtr. Net/net: 11% growth is impressive, even excluding the fact that we are in the midst of a pandemic and ahead of a sizable product cycle. Sticking with our bullish view that FY21 EPS will end-up in the range of $15-17 driven by iPhone cycle + services acceleration but adjusting our target to $440 to reflect higher FY21 EPS. Outperform. Raises target to $440 from $400.
Daniel Ives, Wedbush: First Take on Apple Numbers; Services Teflon-Like Growth and China Rebound. After the bell Apple announced its FY3Q20 (June) results which came in much better than expected across the board and will be a feather in the bulls cap heading into a massive iPhone 12 product cycle over the next year. Overall these were “blow out” results which in our opinion will add another leg to the Apple long term growth story… Importantly, China delivered $9.3 billion in revenue, up 2% y/y (6% in constant currency-an eye popping number) as this key region was considerably better than both ours and the Street’s expectation. Outperform. (Former Street-high) $450.
Amit Daryanani, Evercore: Double Digit Sales Growth Driven By iPhones Drives Upside. Guide Still Missing. Key points to highlight here: 1) Sept-qtr guide is missing – unclear if we get this on the call, 2) iPhone sales came in well ahead of expectations at $26.42B vs. street at $22.2B, 3) Services growth decelerated but was ahead of street expectations with sales of $13.16B (street at $13.1B) and implies ~15% y/y growth (~200bps lower vs. LQ). 4) Stock Split – AAPL announced a 4:1 stock split effective Aug 24th, 5) Services gross-margin up-ticked materially by 300bps y/y to 67.2% (street was at 64.5%, LY was 64.1%) while product gross-margins at 29.7% was ~70bps below last year. Net/Net: The missing guide is a bit of an issue but overall the demand trends are exceptionally robust providing a sustained path higher though the iPhone launch. Outperform. $400.