Despite macroeconomic headwinds, Apple is likely to meet Wall Street expectations when it reports its June quarter earnings, according to Wedbush. In a note to investors, Wedbush analyst Daniel Ives said he believes iPhone demand has held up slightly better than expected amid supply issues plaguing the tech industry. He thinks Apple will hit consensus numbers in the third quarter of 2022.
Analysts expect Apple to report earnings of $1.16 a share on revenue of about $82 billion in June. However, Wall Street still expects Apple to show weakness in the June quarter. According to Ives, “all eyes” are on the iPhone 14 production and demand cycle. Apple is also focusing on an aggressive product pipeline into 2023, which could include a new mixed reality headset.
The June quarter will represent a “peak worry” about Apple’s supply chain issues. While Apple has warned of a revenue hit of $4 billion to $8 billion, Ives expects the impact of any COVID-19 or supply disruptions to subside in the September and December quarters.
Apple’s shipments are key to its ability to weather the macroeconomic storm. Ives still believes in the stickiness of the iPhone upgrade cycle, as about 240 million of Apple’s 1 billion iPhone users have yet to upgrade their devices.
Going into the second half of 2022 and into 2023, the services sector also looks strong. Ives believes that Apple’s services division alone is worth more than $1 trillion. When combined with its hardware, he believes the risk/reward is “very compelling at current levels”: “While the tight market backdrop has created a scary environment for tech stocks, we believe that Apple’s growth story remains intact despite the volatile macro picture.”
Ives maintains an “outperform” rating on Apple with a 12-month price target of $200. His goal is based on his 2022 estimates of the sum of the segments, which are 18 times services, or $1.5 trillion, and seven times Apple’s hardware business, or $2.1 trillion.
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