Analyst Katy Huberty expects Apple’s shares to “re-rate” when the company reports its fiscal Q2 earnings next Wednesday.
From a note to clients that landed on my desktop Wednesday:
High confidence in March quarter beat as ecosystem strength set to shine. We see a positive setup into Apple’s F2Q21 earnings report next Wednesday and believe that a strong beat and raise March quarter combined with more muted institutional inventor positioning relative to F1Q earnings will help AAPL shares re-rate after YTD underperformance (AAPL +0.3% YTD vs. S&P 500 +10.8%).
Most importantly, we expect next week’s report to highlight the strength of Apple’s diverse product and services ecosystem, which continues to push the boundaries of what is possible on a computing device, and which was strengthened today by new iMac, iPad and AirTag product launches (see last paragraph).
Following our quarter-end checks, we are raising our March quarter revenue forecast to $80.2B (+38% Y/Y) and expect every revenue segment to grow at least 19% Y/Y, with Product revenue set to grow 43% Y/Y off a COVID-impacted March 2020 quarter.
Our March quarter revenue and EPS are now 4-5% ahead of consensus, with the most upside in iPad and Mac, while our new FY21 revenue and EPS forecasts are 4% ahead of consensus (2). Our sum-of-the-parts driven price target increases to $158 (from $157) on the back of these changes and we expect positive estimate revisions (rather than multiple expansion) to support share outperformance keeping us Overweight.
Tweaking March quarter iPhone revenue forecast 1% higher on stronger ASP trends; units unchanged. We forecast 52M iPhone shipments in F2Q (+42% Y/Y), which is largely in-line with implied iPhone shipments based on our Greater China Technology Hardware research team’s March quarter iPhone build forecast of 50.5M units (3). Our lead time tracker showed a normalization in lead times for all four iPhone 12 models in the March quarter (4), suggesting Apple was able to increase supply to meet exceptional demand, particularly for the iPhone 12 Pro models.
Maintains Overweight rating and raises target to $158 from $157.
My take: Katy is the best, but a $1 price hike is exactly the kind of target micromanagement Downtown Josh Brown was complaining about last week. See: ‘Why don’t you let them screw up before you get bearish on Apple?’ (video)