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Morgan Stanley’s Katy Huberty believes Apple will come in well above Wall Street’s estimates for its fiscal second quarter, but also expects some cautious guidance going forward amid concerns over COVID.
In a note seen by AppleInsider, Morgan Stanley analyst Katy Huberty has broken down Apple’s second quarter and expects another blockbuster earnings report for Apple. Without pinpointing specifics, she cites iPhone 13 and Macs worldwide sales volumes in the quarter, which reportedly offset relatively weak iPad and App Store revenues in the quarter.
Huberty believes iPhone 13 demand was stronger than expected in the March quarter, with notable global growth, including a year-on-year decline in domestic shipments in China. She estimates that iPhone shipments worldwide are up 10% year-over-year, with a 28% drop among Chinese suppliers.
Her channel checks for the US comment that the iPhone 13 family was the best-selling smartphone model in all three quarters, with the iPhone 13 itself taking the crown of the best-selling model. Considering that Huberty increased its estimate of the average selling price per iPhone sold in the quarter to $878, compared to its previous estimate of $848.
Morgan Stanley iPhone sales mix in 2022
Throughout the March quarter, Huberty also saw the retail chains’ iPad and wearables sales estimates come in lower than expected. As such, she says the average selling price for iPad is down 3% to $610 per sale, meaning she expects iPad revenues to be $7.1 billion. She expects a similar decline in wearables from her previous estimates to $9.1 billion — which is still 16% year on year.
But weaknesses in wearables or iPads are more than compensated for by the Mac, she believes. Citing IDC data, Mac shipments would be close to 7.2 million units, a 5% year-over-year increase, well above its previous estimate of 6.0 million. This should result in $9.5 billion in Mac sales for the quarter, marking a second straight quarter of above forecast Mac revenue and sales performance.
Morgan Stanley’s revenue estimates for Apple Services have been revised down 3% to $19.7 billion. Huberty thinks this is due to lower-than-expected App Store revenue, particularly in January. While she estimates the App Store’s growth and revenue accelerated in March, it won’t be enough to offset those weak January and February.
Despite the decline, Huberty expects App Store revenue to grow in the second half of Apple’s fiscal year 2022. For the year, Huberty lowers its previous estimate of annual services revenue to $80.7 billion — which is still a growth rate of 18%, year on year. over-year.
In total, Huberty expects a record quarter. She expects Apple to report revenue of $94.0 billion and profit of $40.5 billion for the quarter. However, Wall Street estimates for the quarter are well below $90 billion.
In the second fiscal quarter of 2021, Apple posted $89.6 billion in quarterly revenue and $38.1 billion in profit.
For the third fiscal quarter of 2022, Huberty expects revenue of $83.3 billion for the quarter, compared to Wall Street’s current revenue estimate of $86.7 billion. The downward revision is mainly due to the unpredictable impact of COVID lockdowns in China.
“With this setup, we don’t believe that investors need to be aggressive ahead of the quarter,” wrote Huberty. “However, we would continue to buy stocks at any weakness as we expect Apple to remain an outperformer in this more challenging market, similar to the outperformance seen in recent late economic cycles.”
Huberty also expects Apple to announce a new share buyback authorization of up to $80 billion, based on historical trends. A dividend of $0.94 per share is also expected.
Morgan Stanley AAPL Price Target Range
Huberty maintains its price target for Apple stock at $210 per share. Morgan Stanley applies a multiple of 6.0x to Apple’s hardware business and a multiple of 10.6x to Apple’s services. In the estimate, more than $355 billion in revenue is attributed to Apple’s future products, which is powered by $22.6 billion in revenue and a target of 15.7x. The goal of the sum of the parts is a profit of 33.2x a multiple of profit.
The Wall Street consensus for Apple stock is $193.49.
This post The power of Mac and iPhone 13 could propel Apple to record-breaking earnings report
was original published at “https://appleinsider.com/articles/22/04/19/mac-iphone-13-strength-may-drive-apple-to-a-record-breaking-earnings-report?utm_medium=rss”
