Brean Sees More Support For Apple Than Anticipated, Thanks To ASP Reversion

Apple Inc. AAPL reported June quarter revenue and EPS ahead of expectations, and indicated to higher ASPs on lower channel inventory reductions. Brean Capital’s Ananda Baruah maintained a Buy rating on the company, with a price target of $125.

Apple reported its quarterly revenue at $42.4B, marginally higher than Street expectations of $42.1B, while delivering a meaningful beat in EPS, which came in at $1.42 versus Street estimate of $1.38. The company reduced channel inventory by $3.6B, significantly higher than the expected level of $2B.

Encouraging Guidance

Apple projected its September quarter revenue and gross margin at $45.5B-$47.5B and 37.5-38.0 percent, versus Street projections of $45.7B and 38.4 percent.

Although Apple’s gross margin guidance was materially below Street expectations, the company forecasted higher-than-expected revenue. The revenue would likely be boosted by ASPs growing sequentially after the company indicated an end to its channel inventory reductions, analyst Ananda Baruah mentioned.

Apple seems to be suggesting that its September quarter units would be slightly higher than Brean’s 40M estimate, along with a 5-10 percent sequential increase, Baruah stated. He added, “AAPL Sep Q guidance suggests more support for the stock than we'd anticipated ahead of upcoming catalysts over the next 4 - 6 Q's.”

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