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Pacific Crest: Apple Guidance Will Be 'Well Below' Expectations

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Pacific Crest: Apple Guidance Will Be 'Well Below' Expectations

  • Pacific Crest believes that Apple Inc. (NASDAQ: AAPL)’s upcoming quarterly guidance will come in well below consensus expectations.
  • The firm is calling for in-line earnings and revenue numbers from Apple for fiscal Q4.
  • Analyst Andy Hargreaves sees limited downside to Apple’s share price and believes that lowered expectations could ultimately be good for the stock.
  • In a new report, Pacific Crest analyst Andy Hargreaves previewed what he believes will be a tough earnings report for Apple shareholders.

    Hargreaves believes that Apple’s iPhone numbers and guidance will come in below consensus expectations, but he feels that a readjustment of expectations might be just what the stock needs.

    Earnings Expectations

    According to Hargreaves, Pacific Crest is calling for Apple’s fiscal Q4 earnings and revenue to fall in line with consensus expectations. However, the firm expects Apple to guide for fiscal Q1 revenue “well below” Wall Street expectations of $76.4 billion.

    In addition, Pacific Crest is predicting Q1 iPhone unit sales of 66.9 million, a number that Hargreaves believes is below both buy-side and sell-side expectations.

    Related Link: Citi Cuts iPhone Unit Estimates Ahead Of Apple's Q4 Report

    Stable Margins

    Despite Pacific Crest’s call for weak guidance, the firm expects that gross margins on the iPhone will remain stable. This prediction should come as good news for shareholders, as Pacific Crest sees declining iPhone margins as the single biggest risk to Apple’s performance in the long term.

    Limited Downside

    Another piece of good news for Apple shareholders is that Pacific Crest sees little room to the downside from current levels for Apple’s stock.

    “Despite our concern about near-term iPhone units, the extraordinary stickiness of Apple’s iOS platform and its ongoing cash-return program are likely to limit multiple contraction from current levels, which should limit downside,” Hargreaves explained.

    For now, Pacific Crest maintains its Sector Weight rating on Apple.

    Disclosure: The author holds no position in the stocks mentioned.

    Image Credit: Public Domain

    Latest Ratings for AAPL

    DateFirmActionFromTo
    Jun 2019Initiates Coverage OnOutperform
    Jun 2019MaintainsBuy
    May 2019MaintainsOverweight

    View More Analyst Ratings for AAPL
    View the Latest Analyst Ratings

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