Evercore cuts tech estimates across the board, but not Apple's (video)

"We think the Street needs to temper current top and bottom-line expectations for companies in our coverage and beyond." -- Analyst Amit Daryanani

From a note to Evercore clients that landed on my desktop Tuesday:

ALL YOU NEED TO KNOW: We see risk to CY23 estimates across most companies in our coverage as multiple headwinds (strong US dollar, soaring energy prices in Europe, rising interest rates to combat persisting inflation, etc.) will likely temper CY23 expectations and guides. Hence, we are lowering estimates for FY23 across the board as we think the street needs to temper current top and bottom-line expectations for companies in our coverage and beyond. Fundamentally, IT budgets while strong for CY22 have risk for moderation into CY23 and a strong USD will place further pressure on revenue expectations.

Positively, we could see supply chain and logistics/freight costs alleviated which could bolster margins. Key points – 1) PC Units – We think have sustained downside and could be closer to 250M by CY23 vs. street expectations for >280M. 2) IT budgets – we think could be tempered at +2-3% vs. current expectations that are close to 4%. 3) Backlog – we suspect will get extended out or deferred  especially for enterprise companies. 4) Hyperscale – while there is likely a deceleration, we suspect this will remain strong and up low double digits (specially for networking).

Overall, we have lowered our estimates across the board by 2-3% on the top-line and >5% on the bottom-line. We left three models unchanged including AAPL, ANET, and VRT (recent pre-announcement). (emphasis mine)

Net/net: While sept-qtr results should be fine, we see growing risk to Dec-qtr and importantly CY23 estimates given increased macro risk that will temper IT budgets and result in a more prudent but conservative stance from companies. Lowering estimates and targets on most companies and adjusting our ratings on CIEN, FFIV & RXT to In Line from OP.

Maintains Outperform rating for Apple and $190 price target.

My take: Tell us more about Arista Networks (ANET) and Vertiv Holdings (VRT)!

Mark Mahaney, Evercore's senior managing director, picked some winners on CNBC yesterday:

5 Comments

  1. Fred Stein said:
    The market has slightly over-corrected AAPL, because very few understand Apple the way the good people at Evercore do. That’s what markets do. Markets always over-shoot trends.

    After Oct 27, hopefully analysts and the market will see Apple’s strong future and AAPL will start to recover. Don’t expect global fears to dissipate entirely.

    7
    October 11, 2022
    • Jerry Doyle said:
      Spot on brother Fred!

      1
      October 11, 2022
  2. Robert Paul Leitao said:
    Fred: As you say, Evercore closely follows Apple and any adjustments to forward-looking estimates prior to earnings may have already been made. The challenge isn’t Apple’s fundamentals. The challenges are rising interest rates which diminish the current value of future earnings and a contraction in multiples market wide. For long-term investors, today’s market conditions are a rolling buy opportunity. For those that may get distressed over daily share price gyrations, it may be a long winter. I suggest taking the long view. Bear markets eventually come to an end.

    4
    October 11, 2022
    • Neal Guttenberg said:
      Robert,

      I agree. I had been nibbling at NVDA over the past year but am holding off on buying anything right now to see if there is a further correction secondary to the potential macroeconomic picture. My guess is that the correction will happen after I buy something. I have great short term timing ;-). As for Apple, since it has done so well, it is over represented in our portfolio, I don’t plan on any buying except for the possibility of some leaps to try to take advantage of any discounts to Apple’s long term prospects as I see them.

      1
      October 11, 2022
      • Robert Paul Leitao said:
        Neal: I like NVDA long-term. Currently the company faces some serious headwinds from plummeting crypto valuations to geo-political issues with China and falling PC sales. If you have an Apple News+ subscription, there’s a positive story in Barron’s covering five chip stocks recommended by Cowen. I’m quite cautious on the name at this moment yet see the long-term appreciation opportunity. Best wishes to you. I understand why you find NVDA attractive and why you are “nibbling” at this time.

        0
        October 11, 2022

Leave a Reply