“Our favorite large cap tech name to play the 5G transformational cycle is Apple” — Analyst Daniel Ives.
From a note to clients that landed on my desktop Wednesday:
Next Tuesday, July 27th after the bell Apple reports its FY3Q results which we expect will be another beat across the board. The Street is looking for $73 billion and $1.00 of earnings, both of which look likely conservative given the underlying iPhone strength we saw during the quarter with a particular uptick in demand out of China. While the chip shortage was an overhang for Apple during the quarter, we believe the iPhone and Services strength in the quarter neutralized any short term weakness that the Street was anticipating three months ago. Taking a step back we believe based on our recent Asia supply chain checks that iPhone 13 demand will be similar/slightly stronger than iPhone 12 out of the gates which speaks to our thesis that this elongated “supercycle” will continue for Cupertino well into 2022.
From a timing perspective, we believe the current iPhone 13 launch is slated for the third week in September. Asia supply chain builds for iPhone 13 are currently in the ~90 million/100 million unit range compared to our initial iPhone 12 reads at 80 million units (pre-COVID) and represents a ~15% increase YoY out of the gates.
Maintains Outperform rating and Street-high $185 price target.
My take: A 15% increase in iPhone sales would be well received on the Street.