Apple: The best house in tech’s troubled neighborhood

Morgan Stanley’s Erik Woodring sees some upside, some downside, and four key positive catalysts coming into effect for Apple in the coming quarters as the company manages poor economies. Meanwhile, Goldman Sachs analysts seem more optimistic.

March in line, June estimates down

In the near term, the analyst expects the March quarter to be in line with estimates but warns Apple may guide down June revenue to around $80b. March quarter predictions are predicted to be around $91.9b revenue and $1.41EPS. That’s driven by around 54.5 million iPhone sales, sales of around 4.3 million Macs and services revenue of $20.9 billion in the quarter.

Looking ahead into June, Morgan Stanley sess $80.3b revenue with 41 million Mac sales, mitigated by foreign exchange improvements.

But some big positives

However, the positives outweigh the short term gloom.

• Morgan Stanley expects the introduction of the Apple mixed reality headset in June will prompt interest.
• They also predict accelerating services growth in the June quarter.
• Apple has been damaged financially to some extent by foreign exchange instability, but this should now begin to ease, the analysts say. They argue this should make for higher gross margins into 2024.
• Anticipated ‘reacceleration’ of iPhone shipments and revenue in 2024. (Eight out of the world’s tenbiggest selling smartphones are iPhones and the devices account for near half of second user sales).

The analysts also speculate that the potential launch of a hardware subscription program may contribute to strong future revenue generation. If it ever happens. They hold a $180 price target on the stock.

Goldman Sachs is more positive

Over at Goldman Sachs, the analysts think iPhone demand will offset any weakness in other categories. In this rosy picture the analysts hold a $200 target and predicts better than expected smartphone sales.

Other drivers include services growth, they said, citing Apple’s increased ads slots in search and price increases in its subscription services. With an anticipated 1.1 billion users, the analysts also predict lots of additional earnings to boost the company.

Both analyst firms are expecting stock buyback of around $90 billion and increased dividends. In related news, JP Morgan increased its Apple price target to $190 from $175, arguing the firm’s resilience will see it through.

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