Shares of the tech behemoth are up more than 11% this year, but analysts believe the iPhone’s growing strength will be enough to entice investors and drive shares higher.
Other critical issues remain.
Analysts will also be looking for updates on supply chain constraints, signs of growth in Apple’s services business, which includes the App Store and Apple TV+, and whether Apple provides guidance, which it has previously declined to do.
Analysts predict the following for Apple earnings:
“AAPL’s share price has caught up nicely since the end of the [first quarter of 2021], reflecting improved investor sentiment on its iPhone business, but we believe further stock appreciation is likely given the strong momentum across all of its businesses,” said Deutsche Bank analyst Sidney Ho.
Ho went on to say that he expects the company’s results to be on par with or better than the consensus.
Morgan Stanley’s Katy Huberty felt the same way.
“We expect a stronger-than-expected F3Q and F4Q guide,” she wrote in her client preview note.
Huberty was adamant that Apple shares had significant upside, especially if strong iPhone forecasts are to be believed.
Huberty added, “Stock momentum is accelerating into F3Q earnings as recent data points support the FY22 growth narrative.”
UBS recently raised its estimates after checks confirmed stronger iPhone unit growth, particularly in the United States.
“When combined with aggressive promotions from U.S. carriers,” analyst David Vogt wrote, “we believe the backdrop supports solid iPhone unit demand in Apple’s largest market.”
According to JPMorgan analyst Samik Chatterjee, who recently added the stock to the firm’s focus list, the 5G iPhone cycle is in a stronger-for-longer cycle.
Chatterjee believes that “a path to Apple outperforming investor expectations over a longer time horizon rather than just the upcoming earnings print” exists.
Citi analyst Jim Suva went so far as to say that consensus expectations were “too low.”
Even Bernstein analyst Toni Sacconaghi predicted a modest beat.
However, he was still hesitant to advise investors to purchase the stock.
“While AAPL may continue to perform well in the midst of a seasonal trade, we believe that risk reward is balanced to modestly negative over the next six months,” Sacconaghi said.
Outperform rating for Evercore ISI
“While Apple is expected to report a relatively in-line June-quarter, we are currently 5% below consensus on our September-quarter outlook, as we see potential headwinds from both the ongoing supply shortage as well as lapping some very strong comps in most product lines. Apple indicated that supply would have a $3B-$4B impact in the June quarter, and we expect this headwind to accelerate in the September quarter, as all signs appear to indicate that the situation has deteriorated over the past three months.”
Citi has a Buy rating.
“We are raising our estimates for Apple because checks continue to show strong end-market demand for Apple in PCs, smartphones, and wearables, combined with low sequential growth in Services. We believe consensus estimates for the June quarter are too low (even after accounting for the $3-4 billion impact from lower chip availability), which has hampered the iPad roll-out during the quarter. Apple’s stock has underperformed the broader market year to date. We anticipate that shares will outperform in the run-up to the September release of the new iPhone.”
Buy rating for Deutsche Bank
“Recent media reports indicate an increase in iPhone build activity, and findings from our proprietary dbDIG survey indicate strong consumer interest in upgrading to 5G. Furthermore, we believe that improving consumer spending will benefit AAPL’s other businesses. AAPL’s share price has caught up nicely since the end of the first quarter, reflecting improved investor sentiment on its iPhone business, but we believe further stock appreciation is likely given the company’s strong momentum across the board.”
Canaccord Genuity – Buy rating
“We are raising our estimates for Apple’s earnings report on Tuesday, July 27, after the market close, based on strong demand across the company’s products. Apple continues to demonstrate the strength of its product ecosystem, and we believe consensus estimates for Q3 results and Q4 guidance, if AAPL returns to providing guidance, will be conservative. With the 5G upgrade cycle expected to benefit the company until at least C2022, other hardware categories growing by double digits, and a continued mix shift toward high-margin services, we believe the share price remains compelling for long-term investors.”
DA Davidson has a Buy rating.
“We see three potential catalysts for shares over the next year: 1) stronger-than-expected operating results from 1) continued growth in iPhone sales (it remains Apple’s most significant product) as a result of 5G; 2) better-than-expected results from its newer initiatives, including the Apple Watch and Apple TV+, as well as its other service efforts; and 3) an accelerated repurchase effort and incentivized repurchases.
Bernstein has a market perform rating.
“We anticipate a modest revenue increase from Apple in Q3.” While all eyes will be on Apple’s FQ4 guidance, we note that guidance has historically *not* been a good predictor of strength in the following year’s iPhone cycle, and we believe Apple will continue to provide qualitative ‘guidelines’ rather than quantitative ‘guidance.’ While AAPL may continue to perform well in a seasonal trade, we believe the risk-reward ratio will be balanced to slightly negative over the next six months.”
JPMorgan has an overweight rating.
“While the aforementioned factors lead to an increase in our near-term forecasts, the recent momentum driven by improved market share leads us to estimate higher sustainable volumes in future quarters, implying that Apple will outperform investor expectations over a longer time horizon rather than just the upcoming earnings print.”
UBS has a Buy rating.
“Based on strength in iPhones in what is typically a seasonally slower quarter and better Mac sales despite supply chain headwinds, we are raising our FY3Q21 revenue and EPS estimates to $74.7 billion and $1.01 billion, respectively, from $71.3 billion and $0.95 billion, respectively, roughly 1% above street consensus.” We believe the backdrop, when combined with aggressive promotions from U.S. carriers, supports solid iPhone unit demand in Apple’s largest market.”
Morgan Stanley has assigned an Overweight rating to the company.
“We anticipate a stronger-than-expected F3Q and F4Q guide. Stock performance is dependent on the sustainability of recent trends, where we have a bullish skew, and we raise our iPhone forecasts for FY21 and FY22 based on supply chain data and share gains. As recent data points support the FY22 growth narrative, stock momentum is accelerating into F3Q earnings.”
Wedbush has a Buy rating.
“While the chip shortage was an overhang for Apple during the quarter, we believe the strength of the iPhone and Services in the quarter offset any short-term weakness that the Street was anticipating three months ago. Taking a step back, we believe that iPhone 13 demand will be similar to/slightly stronger than iPhone 12 out of the gate, supporting our thesis that Cupertino’s elongated “supercycle” will continue well into 2022.”
Goldman Sachs has assigned a neutral rating to the company.
“We anticipate that Apple will report and guide well next week. The reopening could have caused a brief surge in iPhone demand in the United States, similar to what we saw in China earlier this year. We remain cautious about iPhone demand expectations for the rest of the year, but we anticipate mostly positive news from Apple’s report next week. Commentary on Covid delta variant impacts will be of particular interest to us, given the company’s delayed return to the office this fall.”
Bank of America – Rating: Neutral
“We expect Apple (AAPL) to report a strong F3Q21 based on broad-based hardware strength, but we expect services growth to moderate (we reduced our services growth forecast for June/September). In our opinion, hardware sales of iPhones, iPads, and Macs continue to be strong, and the company continues to benefit from increased spending on electronics due to the remote work/home environment. We attribute the recent rally in the stock market following a long period of relative underperformance to a flight to quality rather than increased expectations of better fundamentals in 2022.”
Cowen has an outperform rating.
“We expect AAPL to report in line with consensus for the June ’21 quarter, driven by steady 5G iPhone and strong Mac and iPad demand that was tempered by product availability due to ongoing chip supply tightness. In lieu of formal guidance, we expect management to provide a broad range and qualitative color for the September quarter, as in previous quarters. With the upcoming release of the new iPhone in September, we anticipate that the 5G upgrade cycle will continue to drive healthy Y/Y growth into CY22, while Mac and iPad supply is likely to fall short of market demand.”