With Apple stock in record high territory ahead of June-quarter results, expectations are elevated on Wall Street for an upbeat earnings report.
When the consumer electronics giant plans to report its fiscal third-quarter earnings late Tuesday, analysts expect Apple (AAPL) earnings of $1.01 a share on sales of $73.3 billion in the June quarter. That would translate to year-over-year growth of 55% in earnings and 23% in sales.
Three months ago, Apple warned of a more dramatic seasonal sales decline from the March quarter to the June quarter than in prior years.
It said the later-than-usual iPhone launch last year boosted March-quarter handset sales. It also said semiconductor shortages would impact production of Mac computers and iPad tablets in the period.
But many Wall Street analysts think Apple was overly cautious with its outlook.
“We believe consensus estimates will prove conservative for Q3 results and Q4 guidance,” Canaccord Genuity analyst Michael Walkley said in a note to clients. “With the 5G upgrade cycle likely a benefit through at least calendar 2022, other hardware categories growing double-digits, and continued mix shift toward high-margin services, we believe the share price remains compelling for longer-term investors.”
Walkley rates Apple stock as buy with a price target of 175.
In premarket trading on the stock market today, Apple stock dipped 0.2%, near 148.25.
Apple Stock Extended
Apple stock scored a record high of 150 on July 15. On June 30, Apple stock broke out of a cup base at a buy point of 137.17, according to IBD MarketSmith charts. It is now trading above the 5% chase zone of its breakout.
Apple has several catalysts driving sales growth, Morgan Stanley analyst Katy Huberty said in her note to clients Friday. They include adoption of 5G smartphones and PC market share gains on the back of its Mac computers powered with Apple-designed processors. Wearables and services provide further growth opportunities, she said.
Huberty rates Apple stock as overweight, or buy, with a price target of 166.
“We are buyers heading into the iPhone 13 launch in September, where we see the combination of mature replacement cycles, increasing 5G adoption, improving retail store traffic, longer battery life and camera quality, and share gains against Huawei as drivers of iPhone outperformance relative to past S-cycles,” Huberty said. S-cycle iPhones are modest handset improvements that occur every other year.
Analysts widely expect Apple to introduce its 15th-generation smartphones, the iPhone 13 series, in September.
Benefiting From Flight To Quality
BofA Securities analyst Wamsi Mohan is cautious on Apple stock. He maintained his neutral rating on the stock with a price target of 160 on Friday.
“We attribute the recent run in the shares after a long period of relative underperformance to a flight to quality rather than on increased expectations of better fundamentals in 2022,” Mohan said in a note.
Wolfe Research analyst Jeff Kvaal is bearish on Apple stock. In a note Thursday, he said he expects the June-quarter report “to offer evidence Apple’s pandemic surge is now ebbing.”
Apple got a lift in sales from people working from home and learning at home during the Covid-19 pandemic. In particular, he sees Mac and iPad sales returning to low to mid single-digit growth soon after big increases during the health crisis.
Kvaal rates Apple stock as underperform with a year-end target price of 125.
Apple hasn’t given formal guidance for sales and earnings since the coronavirus pandemic took hold in March 2020.
JPMorgan analyst Samik Chatterjee doubts that Apple will begin offering specific guidance again with its fiscal third-quarter report. Fiscal fourth-quarter guidance is “likely not forthcoming,” he said in a note Thursday. He rates Apple stock as overweight, or buy, with a price target of 175.
For the September quarter, Wall Street has predicted Apple earnings of $1.14 a share on sales of $81.8 billion. That would translate to year-over-year growth of 56% in earnings and 26% in sales.
Evercore ISI analyst Amit Daryanani on Sunday reiterated his outperform rating on Apple stock with a price target of 175.
“Apple should report relatively strong upside to the June quarter, but Covid and manufacturing dynamics (floods in China regions where Foxconn sites are) could limit how much upside Apple wants to flow into the September quarter,” he said in a note.
Taiwan-based Foxconn is Apple’s principal contract manufacturer for iPhones and other products.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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