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Some Points Of Focus For Apple's Impending Q4 Print

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Some Points Of Focus For Apple's Impending Q4 Print
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Apple Inc. (NASDAQ: AAPL) is scheduled to report earnings Thursday after the market close, and HSBC's analyst, Steven Pelayo, expects to see a report in line with consensus. He estimates quarter-over-quarter revenue growth at 11 percent and EPS of $1.88.

Analyst's Take: Rewards And Risks

Pelayo's estimates are mostly in line with consensus, except for iPhone shipments, which are below consensus because of potentially softer demand for iPhone 8 and constrained iPhone X ramp. He reiterates a Buy rating on the stock, with a price target of $193. The analyst calculated his price target by applying 15 times 2018 EPS multiple. This multiple is a discount to the market, mega-cap tech and other consumer luxury peer multiples, said Pelayo (see his track record here).

Pelayo expects the stock to trade higher in 2018 on a better product mix driving ASP and faster growth from the services segment. He added that recent news indicates a potentially better Chinese market and PC market, while he sees some risks to December quarter.

Pelayo named the main risks for the stock as potential short-term manufacturing problems and a weaker product mix impacting ASP and margins.

Other risks include:

  • Intense competition.
  • Rapid technological changes.
  • Shifts toward more emerging market demand where Apple's premium pricing could be a headwind.
  • Managing a diverse distribution channel.
  • Difficulty in receiving continued support from third-party software developers for applications and the required software.
  • IP protection and legal resolutions regarding patent infringement cases.
  • Worse than expected changes in tax legislation around the globe.
  • Unfavorable global and regional economic conditions.

Related Link: Traders Weighing Critical Questions Ahead Of Apple Earnings

Latest Ratings for AAPL

DateFirmActionFromTo
Dec 2018DA DavidsonReiteratesBuyBuy
Dec 2018CitigroupMaintainsBuyBuy
Dec 2018Morgan StanleyMaintainsOverweightOverweight

View More Analyst Ratings for AAPL
View the Latest Analyst Ratings

Posted-In: Analyst Color Earnings Long Ideas News Guidance Price Target Previews Reiteration Best of Benzinga

 

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