With iPhone builds slowing down, analyst Samik Chatterjee believes investors are primed for softer results.
From a note to clients that landed on my desktop Wednesday:
The setup into the upcoming earnings print is dramatically different from the last one with the focus on near-term earning drivers having significantly moderated post the peak holiday sales quarter.
With feedback from the supply chain indicative of iPhone builds moderating, led by the softening trend for smartphone sales in China as well as slowing momentum of 5G iPhone sales, we believe investor expectations are primed for softer results relative to sell-side consensus.
We expect to see modest upside to investor expectations led by the momentum in Mac and iPad shipments — which investors are concerned will wear off in 2H21 with the moderation of WFH tailwinds, as well as strong growth in Services, while iPhone revenues track more in line with expectations.
Relative to guidance, investors are not expecting an explicit quantitative guidance from Apple, but instead are expecting the company to qualitatively guide to weaker seasonality of iPhone revenues relative to last year when the channel fill of iPhone SE contributed to results.
The combination of modest beats and low expectations creates a favorable setup into earnings, but the absence of material iPhone beats and the ~11% move in the stock already over the last month could limit material upside on sentiment from the print.
Maintains Overweight rating and $150 price target.
My take: A modest, well-modulated note.