“That said, we expect the bigger driver of the earnings upgrade cycle to be F2Q (March-end) revenue/EPS expectations.” — Analyst Samik Chatterjee
From a note to clients that landed on my desktop Thursday:
Apple shares are up +15% since the last earnings report, where it missed consensus revenue estimates on account of supply chain challenges, and is outperforming the broader market (S&P), which is only up +3%, as expectations of an earnings upgrade cycle with the majority of the tailwinds associated with the iPhone 13 cycle tracking better than investor expectations.
We expect the upcoming earnings print for Dec-Q (F1Q) to feature some of the headwinds from the slow supply chain ramp in relation to new products, which will limit the magnitude of upside; although, we expect a modest beat nevertheless, led by better iPhone shipments.
That said, we expect the bigger driver of the earnings upgrade cycle to be F2Q (March-end) revenue/EPS expectations, which will include guidance for above seasonal iPhone revenue as the company achieves channel inventory balance later than in prior year’s and supply improves (iPhone builds expected to track 62 mn in F2Q22 vs. 50 mn in F2Q21 and 37 mn in F2Q20), even as demand drivers remain strong.
We forecast a modest beat on revenue/earnings for F4Q, but an upgrade for estimates for future quarters driving our estimates to be more materially above consensus for the full-year (FY22). While the recent outperformance does create a tough hurdle in relation to expectations from the print itself, we believe investors will continue to justify the premium earnings multiple (30x) on expectations of further earnings upgrades, driving the shares higher with the positive outcome from a combination of a modest F1Q beat and a better outlook.
Maintains Overweight rating and (Street-high) $210 price target.
Cue Figures 1 and 2:
My take: Now there are three big firms at $210: JPMorgan, Merrill Lynch and Evercore. Right behind them at $200 are Wedbush, Citi and Morgan Stanley.