Will Forex Dig Into Apple's Earnings?

In a new report, RBC Capital analyst Amit Daryanani takes a look at just how much of an impact forex will have on Apple Inc. AAPL’s bottom line in 2016.

In 2015, Apple enjoyed more than $4 billion in forex-related hedging gains, which added an estimated 0.5 percent to overall gross margins. However, onlookers are concerned that the roll-off of Apple’s hedges will provide a major earnings headwind this year. UBS is not convinced that the impact will be significant.

“While the street expects muted units/revenue guide, there has been recent concern that AAPL could see severe hedging headwind like IBM did, we think that is unlikely and the impact on gross margins, while notable, isn’t something that can’t be offset via other levers,” Daryanani explained.

Related Link: Apple's Long-Term Chart Remains Bullish

Despite March quarter iPhone sales “noise,” Daryanani predicts that Apple’s stock “should work appreciably higher” throughout the year on the strength of higher iPhone and iPad Pro prices.

UBS maintains an Outperform rating on Apple and a $130 price target for the stock.

Shares trade recently at $99.98, up 0.5 percent heading into its earnings report on Tuesday afternoon.

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