Daniel Ives expects good news from Apple and Microsoft this week

From "Can Microsoft and Apple Save Tech Earnings Season?" a note to clients that landed on my desktop Monday:

We believe the two most important tech earnings this week are Microsoft (Tuesday after the bell) and Apple (Thursday after the bell) which could dictate the path of tech stocks over the coming months. To this point, we are expecting strong numbers from both stalwarts Microsoft and Apple this week which would be much needed good news for the tech sector in this white knuckle time...

China growth remains the fuel in the engine for Cupertino. We estimate that Apple has gained roughly 300 bps of market share in the key China region over the last 12 months on the heels of its 5G iPhone 12/iPhone 13 Tag Team product cycle. We are also seeing very strong ASPs out of the China region continue to play out with more consumers focused on the Pro/Pro Max which is a nice positive for the March quarter which should help drive top-line upside.

The focus naturally of the Street has been on the chip shortage for Apple (and every other tech/automotive player) and Covid China factory shutdowns, however the underlying iPhone 13 demand story for Cupertino both domestically and in China is trending ahead of Street expectations.

While the supply chains issues have curtailed some growth (~15 million iPhone units) for Apple over the past few quarters on this massive product cycle, we believe the pent-up demand story is still being underestimated by investors and will be a laser focus of the Street later this week.

Maintains Outperform rating and, last I heard, a $200 price target.

My take: Ives' target has been $15 below Street high since January. I suspect he's about ready to pounce.

13 Comments

  1. Daniel Epstein said:
    A lot of questions coming into earnings this week. Market has cut Apple’s stock price by over a year’s worth of earnings in the last week due to macro factors which are likely overstated. Last quarter info seems unlikely to be important to the price action. Another record quarter will probably be ignored or discounted due to the overall negativity about the world. Buyback and dividend increase will likely be prudent. Usually better for Apple stock price after earnings if it performs poorly before reporting.

    1
    April 25, 2022
  2. Robert Paul Leitao said:
    Microsoft reports tomorrow and Apple reports on Thursday against a back drop of outflows from US and global equity markets. Of course rising interest rates are contributing to negative investor sentiment. This morning MSFT is bucking the market trend ahead of tomorrow’s earnings report as analysts expect a strong earnings report. As Dan Ives suggests, sustained demand for Apple products may be overlooked by investors at this time with the shares trading at November 2021 prices.

    0
    April 25, 2022
  3. Robert Paul Leitao said:
    Apple and Microsoft are $2+ trillion dollar market cap equities and DJIA components. Both enterprises are raising their dividends annually and each have multi-year share repurchase programs in place. Additionally, the two enterprises continue to deliver revenue and profit growth fueled in part by the ongoing digital transformation around the world that was accelerated by pandemic period demand and the shift to remote work and changes in business and business-to-consumer communications. We’ll see how the market responds to the quarterly results of both enterprises beginning tomorrow with Microsoft followed by Apple on Thursday. Dan Ives is bullish on both enterprises.

    1
    April 25, 2022
  4. Steven Philips said:
    I’d like to see a little extra push on the dividend side to compete with bond interest.

    4
    April 25, 2022
    • Robert Paul Leitao said:
      Steven: Yes. The opportunity costs of investing in equities is rising as interest rates rise. In my view, Apple should be targeting no less than 25% of the prior year’s net income to return to shareholders in the form of dividends. Apple is a growing enterprise and a blue chip stock. There would be plenty of cash remaining available to continue a robust share repurchase program. By boosting the dividend, growth and income funds would find the shares more appealing and the increased demand for shares would buoy the share price.

      6
      April 25, 2022
  5. David Baraff said:
    Would love a bigger dividend increase.

    But honestly, I will be shocked if Apple does anything other than what they’ve done in the past, e.g. raise by $0.03 to an even $0.25 per quarter. This would be consistent with last behavior. Heck, it probably will even just be a 0.02 raise to 0.24 per quarter. But hoping for that extra penny…

    0
    April 26, 2022
  6. Jerry Doyle said:
    I am agnostic on this subject of increasing the dividend or continuing with a higher emphasis on buybacks. I do not need the dividends for my current lifestyle and consequently, I use them for repurchasing more Apple shares. The downside for me on increased dividends is the increased tax that comes with it vs. no such tax through increase buybacks.

    0
    April 26, 2022
    • Bob Goldstein said:
      @Jerry I have a lot of shares in an IRA account that I am not paying tax on the dividends. I reinvest the IRA dividends into more shares. I also have shares in a regular account that I do pay tax on the dividends but I am happy to pay the tax as I have a lot left over to support my retirement needs.
      I don’t understand why so many people support the bulk of the free cash going to buybacks. The share price fluctuates, buybacks or not. I think the share price today is down about $22 from its high. If someone had to sell shares that would be a big drop in their wealth. Who’s to say Apple won’t to a major drop from $158? The dividends are money in our pockets

      0
      April 26, 2022

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