For its fiscal third quarter, the hardware tech behemoth reported $1.30 earnings per share.
The iPhone, which generated $39.57 billion in revenue, was largely responsible for the top-line outperformance.
The company did, however, warn that growth could slow in the coming quarter, owing in part to the ongoing semiconductor shortage.
In a note, JPMorgan’s Samik Chatterjee stated that the report confirmed that 2022 could be another strong year for the iPhone, despite supply chain issues. The firm reiterated its overweight rating and $175 per-share target, implying a 19.2 percent increase from Tuesday’s close of $146.77.
“While supply uncertainty limits near-term visibility for the company and investors alike, we see long-term drivers unaffected by the temporal headwinds, including stronger-than-expected iPhone demand/market share led by a strong upgrade cycle, which sets up for material revisions to 2022 iPhone volume expectations,” according to the JPMorgan note.
“Supply constraints are expected to be a headwind for iPhone shipments in Q421, but we anticipate that these purchases will be postponed rather than lost. “We believe that iPhone revenue is increasingly recurring in nature, and we raise our YE21 PT to $190,” said the Atlantic Equities note.
However, Bank of America analyst Wamsi Mohan stated in a note that the chip shortage could be only one of the company’s upcoming challenges. The firm’s neutral rating and $160 price target for the stock were maintained.
“Our concern remains that if the Delta variant of COVID causes additional lockdowns, Apple may face the dual headwinds of tougher comps and weaker demand in Hardware, only modestly offset by any Services re-acceleration,” according to the Bank of America note.
Here’s what analysts had to say about Apple’s earnings:
Evercore ISI – Outperform, price target increased from $175 to $180.
“While the debate over the ‘Peak cycle’ will continue for some time, we see a trifecta of levers in place for AAPL to keep climbing higher – I an iPhone 5G cycle that is still early in adoption, b) monetization of install base across services and wearables, and c) improved profitability and FCF as GMs remain higher. We’re sticking with OP and raising our target to $180 (from $175 previously) to reflect higher [forward 12 months] EPS.”
Citi recommends a buy with a price target of $170.
Apple reported June quarter results that were above consensus in terms of sales and earnings per share, as well as a solid beat across all segments, as consumer demand momentum continued despite the ongoing work and learn from home environment. Due to COVID and ongoing retail challenges, no new guidance was provided.”
Outperform, $185 price target, according to Raymond James
“Following the June quarter results, we reiterate our Outperform rating and $185 price target on Apple. Apple had a strong quarter, with revenue 11 percent higher than expected and solid results across the board. While management did not provide specific revenue guidance, we believe commentary indicates 30 percent year-over-year revenue growth, which is ahead of consensus. We remain optimistic for this year’s iPhone cycle, owing to pent-up demand from last year’s late launch and a large installed base yet to migrate to 5G, as well as the possibility of better availability of what turned out to be more popular high-end models, which should improve the mix.”
Oppenheimer – Outperform, price target raised from $160 to $165.
“We continue to believe that Apple’s in-house chip, the breadth and synergy across Apple devices, and the temporary lack of major feature innovation across consumer hardware position the company for a period of accelerating share gains across product categories.” The increase in share value and subsequent increase in active installed base positions the company well for further margin expansion from more sustainable growth in service revenues.”
Morgan Stanley – Overweight, price target increased from $166 to $168.
“We leave the quarter more confident in the sustainability of revenue growth in FY22, where we model 5% growth versus consensus of 4% Y/Y and buyside expectations of flat to down….” We like the setup for fiscal year 22. As we stated in our earnings preview, the key investor debate remains the sustainability of revenue growth, and we leave F3Q earnings with even more confidence that Apple will grow in the December quarter and in FY22.”
UBS – Buy, price target increased to $175 from $166.
“Increased interest in Apple offerings leads to material revenue and earnings per share growth.” Although our research indicated that Apple’s FY3Q results would be solid and above expectations, the magnitude of the rev and EPS upside in the quarter was somewhat surprising in our opinion given supply chain headwinds.”
Credit Suisse has a neutral rating and a price target of $150.
“The business continues to execute well, with broad-based strength across the portfolio, led by outsized iPhone growth in the early stages of 5G and Services monetization. That said, with the stock trading at 26x Street CY22 EPS (in line with Services peers), we remain Neutral amid fading momentum vs. increasingly difficult comps as (1) iPhone upgrades and ASPs/mix normalize as 5G becomes more mainstream, (2) App Store slows post-COVID, and (3) iPad/Mac demand fades.”
Canaccord Genuity – Buy rating, price target increased to $185 from $175.
Apple is well-positioned to benefit from the 5G upgrade cycle and anticipates strong overall growth trends as 5G smartphones roll out and its installed base expands with higher-margin services revenue.
Deutsche Bank upgraded the stock to a buy rating and raised the price target to $175 from $165.
“In light of the results, we raise our estimates to reflect the F3Q beat and F4Q outlook, and we increase our price target from $165 to $175. With AAPL well positioned for a strong iPhone cycle and continuing to expand its product/offerings (increasing the $ per person spent on AAPL offerings), we believe its premium valuation is justified and maintain our Buy rating.”
Wells Fargo – Overweight, with a $165 price target up from $160.
“Apple delivered F3Q21 results that exceeded our / consensus expectations, led by a 15% increase in iPhone revenue and record services growth of +33 percent year on year.
Piper Sandler – Overweight, with a $165 price target up from $160.
“We believe Apple is benefiting from the 5G upgrade cycle, which we believe will last at least another two years. However, we believe that as the world returns to normal, the Mac and iPad businesses may begin to deteriorate. Overall, we are significantly raising our estimates and believe the company is extremely well-positioned.”
Needham recommends a buy with a price target of $170.
“This time around, the iPhone cycle is different. Upgrades and switchers both experienced double-digit growth. Results for the iPhone are strong around the world- 5G penetration is very low, but 5G is driving adoption at the high end, because people expect to own their iPhones for three years and want to be ready for 5G when it arrives.”