Apple, Inc. AAPL shares pulled back over 3% in Thursday’s premarket trading after the company reported fiscal year first-quarter results that trailed expectations.
The Apple Analysts: Wedbush’s Daniel Ives maintained an Outperform rating and $175 price target.
KeyBanc Capital Market analyst Brandon Nispel maintained an Overweight rating and $177 price target.
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The Apple Thesis: Apple’s first-quarter iPhone revenue miss reflects roughly eight million to nine million units being pushed out of the December quarter due to supply chain issues and an 800 basis points of forex headwinds, Ives said.
“We believe overall given the supply chain disaster that Apple saw this was better than feared iPhone number and ultimately more of a supply issue than a demand issue,” the analyst said. Apple seemingly is cutting back on some orders around Macs, iPads and AirPods over the coming quarters to reflect a softer consumer backdrop, he noted.
Ives also noted that the all-important China region saw a 7% year-over-year drop in revenue but grew on a currency-adjusted basis. He termed it an “impressive performance” despite the COVID-19 lockdowns in November and December.
“In a nutshell, we view these results as a positive in a glass full view as ultimately the demand environment is more resilient than the Street is anticipating with China front and center as a key heading into 2023,” Ives said.
The following are Ives’ takeaways from the earnings call:
- Continued consumer iPhone demand despite the forex impact and macro headwinds.
- Year-over-year revenue growth in the March quarterly is likely to be flat with the December quarter, with iPhone revenue growth accelerating.
- Mac and iPad revenue to decline in double-digits in the March quarter due to the macro backdrop.
- Services growing year-over-year despite continued headwinds in advertising and gaming.
“Overall our initial take is Apple cut numbers which were needed given FX, supply chain issues, and an uncertain macro but underlying demand out of China and from the iPhone 14 Pro front were net more positive than feared with many bears yelling fire into a crowded theater heading into the print,” Ives said.
KeyBanc Recommends Owning Apple: Apple’s below-consensus results were more in line with KeyBanc’s estimates, analyst Nispel said. The guidance did not give the firm any reason to change its estimates, he added. The analyst, therefore, maintained his revenue estimates largely unchanged but said the consensus estimates need to move lower.
The active base of installed devices topping 2 billion and Apple’s commentary on China reopening are positives, the analyst said.
“User growth remains the most important driver of the business, and we would look past all this noise in supply, macro, and FX, the majority of the worst of which is behind us,” he added.
Apple’s flywheel franchise Intact, Munster Says: Deepwater Asset Management co-founder Gene Munster noted that in his 20 years of covering Apple, only three times did results come in below expectations.
“Apple’s flywheel franchise is intact,” Munster said. He referred to the over 2 billion installed active devices and over 935 million in paid subscriptions signed up through App Store. The company added over 150 million paid subscribers in the past year, with that number equal to the total number of Amazon Inc. AMZN Prime subscriptions, he said.
Although Apple’s business is being negatively impacted by the supply chain and the macro, it is maintaining innovation excellence with its core products, the fund manager said. Potential new products such as augmented reality and auto are optionalities, he added. He also mentioned the loyal, engaged and growing customer base.
“All signs suggest sunnier days will return for Apple,” Munster said.
Price Action: Apple shares ended Thursday’s session 3.71% higher, at $150.82, but fell 3.22%, to $145.96, in after-hours trading, according to Benzinga Pro data.
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