This earnings season comes against a backdrop of all kinds of economic worries and market watchers are keeping a close eye on how the tech giants perform. Leading market participants can shape the stock market’s narrative, hardly any more so than Apple (AAPL).
The world’s biggest company by market cap reports F3Q (June quarter) results today after the closing bell.
Despite macro uncertainties still impacting consumer spending, Deutsche Bank analyst Sidney Ho expects earnings to be “largely in line” with the firm and Street’s estimates, showing year-over-year growth in the low-single digits.
While Apple has warned that supply chain snags are anticipated to impact the quarter’s revenue haul by $4 billion to $8 billion, Ho thinks the company has managed its supply chain better than it thought it would. “Our checks of delivery times show most products are immediately available with a few exceptions (notably new MacBook Air), hence we see upside to the expected constraints,” the 5-star analyst noted.
Although consumer demand for smartphones and PCs has waned on account of the difficult macro environment, going by data from third party research firms, Ho is “positive” on AAPL's share gains in the segment. That said, the period has also been marked by FX issues, which have become a “bigger revenue headwind.”
Looking ahead, should Apple decide to provide any guidance, Ho thinks that as a reflection of the current operating climate, the company is likely to take a cautious approach and guide “below” present Deutsche Bank/Street expectations.
However, Ho thinks the market is already factoring in “slower growth” and notes that in order to deal with a potential economic downturn, the company intends to slow hiring and cut back on growth initiatives.
“On the positive side,” Ho sums up, “AAPL's strong cash balance should allow the company to remain aggressive in share repurchases.”
Overall, if you are looking for a “good hiding place in a volatile market,” Ho thinks Apple is the place to be. The analyst rates the tech giant a Buy, backed by a $175 price target. The figure makes room for upside of 12% from current levels. (To watch Ho’s track record, click here)
And what about the rest of the Street? It’s mostly Buys - 22, in total – while an additional 6 Holds are not enough to derail the Strong Buy consensus rating. The forecast calls for 12-month gains of 14%, considering the average price target stands at $179.53. (See Apple stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.