Reduce Overweight Positions, Says Bernstein: Apple’s full-year revenue guidance of 7% growth appears high, says Bernstein’s Sacconaghi, as he sees the iPhone 15 as more evolutionary rather than revolutionary.
The analyst expects the softer uncertain macro and consumer environment to hurt Apple. The company also faces a 53-week comparison, he added.
“We view near-term risk-reward on AAPL as relatively balanced; Investors may want to look reduce overweight positions, beginning in September,” Sacconaghi said. The analyst based on his recommendation on seasonal trading pattern and the stock’s stretched valuation.
The third-quarter earnings outperformance was due to lower-than-expected operating expenses and a lower tax rate, the analyst said.
Credit Suisse’s 3 Key Takeaways: Following Services business outperformance, fueled by record performances for four categories and quarterly records for three categories, Credit Suisse’s Cross said she sees further acceleration ahead. As the ad market continues its recovery and the company laps tough App Store comps, the business will likely accelerate, thanks to a record installed base of active devices, she said,.
The analyst also pointed to strong gross margin guidance of 44%-45% for the fourth quarter, as the company benefits from favorable commodity costs, a growing mix of Services, scaling up of newer businesses and timing of product releases.
Emerging markets have been a bright spot for Apple for its hardware sales, with particularly strong performance in India, Indonesia, Southeast Asia, Latin America and the Middle East, Cross noted. The analyst does not see a margin hit from the higher mix of emerging market sales, as Apple mainly targets wealthy customers in these countries,
Apple’s Tim Cook said on the call the company is researching use cases for generative AI in its products, Martin noted. AI/ML is core fundamental technology integral to every product the company makes, she noted.
“Overall, this remains a golden installed base story as Apple further penetrates its unmatched ecosystem,” Ives said, adding that strong upgrade potential and higher ASPs set up Apple for a “mini super cycle” despite the murky macro.
To sustain 5%-10% revenue growth over the next seven years, Apple needs new big markets and India is key on that count, Munster said. Longer term, the analyst expects India to surpass Greater China, which is estimated to account for about 20% of sales this year.
Munster also said investors are missing the potential of the Vision Pro mixed-reality device.
“I believe spatial computing will join mobile as our central daily computing platforms and by 2030 it will account for more than 10% of Apple’s overall business,” he said.
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