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Last Minute Thought: Buy or Sell Apple (AAPL) Stock Before Fiscal Q3 Earnings?

support@smarteranalyst.com (Ben Mahaney)

In just a few minutes, Apple (AAPL) will get a chance to remind investors why its business is worth nearly $1 trillion.

The earnings report comes at a time when Apple is facing headwinds in its iPhone business. The company's latest round of new iPhones is failing to drive year-over-year growth in the important segment. Fortunately, strength in services, wearables, and iPad helped make up for a continued decline in iPhone revenue. In addition, growth beyond iPhone reinforced why the company is more than its smartphone segment.

Should you buy Apple stock ahead of the print? Monnes' top analyst Brian White says yes, as he reiterates his Buy rating and $245 price target, which implies nearly 17% upside from current levels. (To watch White's track record, click here)

White is forecasting 3Q:FY19 iPhone revenue to fall by 12% YoY to $25.88 billion, the third consecutive quarter of decline. However, while the analyst expects the smartphone market to remain lackluster, he believes the ramp of 5G networks will provide consumers with an excuse to upgrade their smartphone next year.

Furthermore, White is forecasting 3Q:FY19 Mac revenue of $5.41 billion (up 3% YoY), iPad sales of $5.17 billion (up 12%) and Wearables, Home & Acc. revenue of $5.06 billion (up 36%).

White noted, "We expect Apple’s Services business to remain a bright spot in 3Q:FY19 with sales of $11.79 billion (up 16% YoY). In H2:CY19, a new wave of monetization opportunities in Services is expected to launch, providing users with more reasons to inhabit Planet Apple. Apple News+ launched in March and Apple Card is planned to roll out this summer (U.S.), while Apple TV+ and Apple Arcade this fall. We expect sales in Greater China to remain challenged and experience approximately a 15-20% YoY decrease in 3Q:FY19 (vs. down 22% in 2Q:FY19), the third consecutive quarter of decline."

All in all, Wall Street sizes up AAPL as a ‘Moderate Buy’ stock, as the bulls edge out the cautious on the tech giant. In the last 3 months, AAPL has received 20 bullish ratings versus 13 analysts hedging their bets, and 2 'sell' ratings. That said, AAPL shares have risen about 35% year-to-date, and the consensus price target of $215.75 hints there's limited upside ahead, with the stock fetching $209. (See AAPL's price targets and analyst ratings on TipRanks)

 

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