"The modest headwinds to operating earnings from a slower macro are more than offset by the leverage of pricing power." -- Analyst Samik Chatterjee
From a note to clients that landed on my desktop Friday:
Contrary to popular investor sentiment and expectations of downside to estimates on account of slowdown of consumer spending and FX headwinds, we believe near-term estimates are instead resilient relative to the conservative guide already issued by the company on the last earnings call. In our view, for F3Q (Jun-end), better supply dynamics (as evidenced through lead times) will overwhelm the modest demand weakness seen till date as well as the incremental FX headwinds (of about 150 bps y/y on top of the 300 bps headwind y/y already baked into guidance), with our forecasts for revenue/earnings now largely in line with sell-side consensus but better than buy-side expectations and sentiment.
That said, beyond the near quarter, the headwinds drive us to lower our revenue and earnings forecasts modestly, led by lower volume expectations (iPhone 14 expected to be modestly below iPhone 13) and escalating FX headwinds.
However, as we extend to FY24E, the modest headwinds to operating earnings from a slower macro are more than offset by the leverage of pricing power for better margin sustainability as well as better leverage of the balance sheet to repurchase shares, leading us to largely maintain our FY24 estimates as well as our view on valuation for the shares.
Maintains Overweight rating and $200 target.
My take: $200 is a favorite Apple price target, shared -- last I heard -- by eight sell-side analysts.