Evercore: Apple to report a modest upside, but its moat remains strong

“The magnitude of upside especially on iPhones will be driven by supply and not demand.” — Analyst Amit Daryanani

From a note to clients that landed on my desktop Wednesday:

ALL YOU NEED TO KNOW: Apple should report modest upside to Sept-qtr expectations despite concerns around supply headwinds as we think AAPL has largely procured enough capacity for the initial launch – though we do think the magnitude of upside especially on iPhones will be driven by supply and not demand.

We are forecasting ~30% y/y growth in the Sept-qtr (Apple guided “strong double digits”) and margins should also remain elevated with strong iPhone mix and Services growth…

While we are cognizant that comps get more challenging beyond Sept- qtr esp. for Dec-qtr (iPhone 12 Pro/max were launched in Nov last year) and certainly the supply situation is broadly getting worse – focus will be on commentary around the recently launched iPhones and durability of demand in Dec-qtr and beyond.

Street is modelling for only 2% growth in FY22 after 34% in FY21. We see potential for upside through FY22 driven by iPhone share gains in China, carrier promotions and continued strength out of Wearables and Services segment.

Net/net: Apple remains well positioned to deliver both secular earnings growth and significant capital returns over a multi-year period.

Maintains Outperform and $180 target.

My take: Daryanani’s $86.15 billion revenue estimate puts him in the middle of the pack, Street-wise.

3 Comments

  1. Robert Paul Leitao said:
    Apple has a widening economic moat which may become more apparent as analysts get past their preoccupation with “tough compares” and the strength of the multi-year iPhone upgrade cycle reveals itself over the next 12 months. I’m not concerned how Apple trades immediately following tomorrow’s announcement. My focus is on the share price upside over the next several months as Apple continues to repurchase shares on the cheap side of the valuation mountain and not anywhere near the top. The scenery will get better.

    2
    October 27, 2021
  2. Fred Stein said:
    Amit gets it.

    As for street’s 2% growth in FY 2020, let’s remember:
    1) The street is usually low by a few percent.
    2) They likely do not account for buybacks.
    3) The street average includes out-of-date projections. The demand for the 13 Pros and the new MacBook Pros will increase 2020 actual results substantially.

    Make a mental note of the street’s $5.68 FY 2022 EPS. See ya next year.

    2
    October 28, 2021
    • The high estimates of less than $11 billion for iPad seem low. New models and price points + Ongoing WFH, massive orders from major school districts worldwide and the sight of iPads as POS terminals in so many busy places lends credence to higher numbers. Like $15 billion.
      One fun way l play the analysts guesses comes off The Price is Right show. The last lady always bids just $1 higher than everyone else.

      0
      October 28, 2021

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