Amit Daryanani asks: ‘Is Consensus Too High for March?’

“We suspect current street models are under-appreciating the typical seasonality Apple witnesses in the March quarter.”

From a note to Evercore clients that landed on my desk Sunday:

ALL YOU NEED TO KNOW: We expect AAPL will report an in-line to likely upside vs. street expectations for Dec-qtr, but we suspect current street models are underappreciating the typical seasonality AAPL witnesses in the march-qtr.

For context, AAPL has typically seen march-qtr sales down 32% q/q vs. current street models calling for a more modest 25% q/q drop, our updated model implies revenues in march-qtr will be around $85B (implying 28% q/q drop) reflecting some contribution from iPhone SE3 in the month of march.

Fundamentally, we continue to think AAPL remains a core mega-cap to own and they are well positioned into H2:22 with several key product launches.

Near-term, we think the risk is that estimates take a bit of a pause as street models for march/june appear to imply a better than seasonal pattern. Data points through the quarter have been largely mixed –

    1. China smartphone data shows a notable deceleration in Dec-qtr (Dec -15%, Nov +10% and Oct +88%); furthermore the December data suggested that perhaps the share gains vs. local OEMS have normalized,
    2. Delivery times for iPhones have continued to curtail and are close to normal levels, implying a healthy dec-qtr driven by better availability and likely channel fill,
    3. SensorTower data implies deceleration on services revenues with Dec-qtr pegged at +13% (Oct +16%, Nov +15% and Dec +9%).

Apple appears to have anticipated this slowdown with guidance calling for services revenue to decelerate. Net/net:Apple remains well positioned to deliver both secular earnings growth and significant capital returns over a multi-year period.

Maintains Outperform rating and $210 target.

My take: It’s all about the guidance for these guys.


  1. Robert Paul Leitao said:
    Services revenue growth is likely to slow as Apple laps the 2021 pandemic year. However, the immediate post-Christmas week of app and services revenue will flow into the March quarter. Additionally, there’s several billion dollars of device demand pushed into the March quarter due to prior supply constraints. Apple may continue to be cautious on forward guidance. While a 5G iPhone SE – possibly with a change to naming nomenclature – may be released in the March quarter, management does not usually included the financial impact of unannounced new products and product upgrades in guidance. I would buy Apple based on long-term strength and fundamentals and not trade Apple on earnings and guidance. Whatever happens with the share price immediately after earnings will be a faint memory by fall.

    January 23, 2022
  2. Robert Paul Leitao said:
    In my view, this is not an “upward momentum” market today (obviously!). I wouldn’t be buying anything for the purpose of short-term trades. Either like the fundamentals and long-term outlook of an equity or look elsewhere. But that’s just my view. Please perform your own due diligence and make your own informed decisions. I like where I expect Apple to be five years from now. Right now there might be some unpleasant slowdowns as investors change directions, sometimes get lost and turnaround, and lights seem slow to change on the way to the fast lane on the market freeway. In other words, it might seem like we are all going nowhere fast for a little awhile. Again, please perform your own research and strive to make informed decisions.

    January 23, 2022
  3. David Emery said:
    Chinese New Year is Feb 1, so that goes into the next quarter. It’s my recollection this is a significant buying time in China, but not as big as Singles Day.

    January 23, 2022

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