Apple (AAPL) doesnt reportresults until after the closing bell on Tuesday, July 31...but it's never too soon to start pontificating about what to expect.
Apple Inc.
The stock's received a couple price target boosts today as analysts contemplate what Apple might say. Morgan Stanley's Katy Huberty has dug into the work of quantitative analysts to find that probably the current quarter, not the one that Apple is reporting, is likely going to be lighter than expected.
Huberty sees Apple probably delivering an "in-line June quarter but providing a slightly weaker-than-consensus September quarter outlook due to a possible October launch of the 6.1-inch LCD iPhone."
We currently see no delay in the ramp of Apple's upcoming flagship 5.8" or 6.5" OLED iPhones. However suspected issues with LED backlight leakage have caused a 1 month delay in mass production of the 6.1" LCD iPhone, although this is down from a 6-week delay baked into the original production forecast, according to suppliers.
Huberty's relying in part on the work of Morgan Stanley's quants to figure out what to expect for the September outlook. She thinks there's evidence of a slow-down for the current quarter:
Over the last 6 months, we have worked with our Morgan Stanley quant team to consolidate data on a larger number (50-60) of Taiwanese Apple suppliers, and systematically explore the correlations or statistical inferences that can help shape our views on Apple's revenue guidance. Ahead of March quarter earnings, this quant work successfully predicted an in-line guide, which was more bullish than our below-consensus fundamental expectations. In the June quarter, these supply chain companies had a strong April and May, but a weaker June, especially a subset of 12 suppliers (a third of which are ODMs) that have been identified as having a higher correlation to Apple sales guidance and stock performance than others. For this subset of companies, when Y/Y sales growth decelerates, Apple's one quarter forward guidance typically comes in below consensus. This quarter, sales growth for these companies decelerated by 600bps vs. March quarter results, therefore we see modest downside risk to September guidance vs. consensus, in line with our fundamental view (Exhibit 11). However, 1) Apple's inventory dynamic discussed above, 2) a later production launch a year ago impacting Y/Y comps, and 3) a 1 month delay in the 6.1" LCD iPhone ramp are factors that could weaken the relationship this quarter.
Still, Huberty, who has an Overweight rating on the stock, raises her price target to $232 from $214 to reflect the fact that peer stocks are getting more richly valued of late:
Shares of Apple have gained 0.6% to $192.83, while Microsoft (MSFT) has 0.5% to $107.46 and HP (HPQ) has declined 0.3% to $22.98.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
