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Apple earnings preview via Bank of America

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Analysts Notebook wrote a column · Apr 26, 2022 06:21
$Apple (AAPL.US)$ will report its fiscal second-quarter earnings report after the April 28 market close.
• Capital return, services growth and iPhone sales in focus heading into earnings.
• Bank of American analyst Wansi Mohan kept a BUY rating and $215 price target.
Expecting a new buyback authorization, dividend increase
Apple reported its 2Q22 (March) after market close on Thursday, April 28. As in previous years, Bank of America analysts expect Apple to announce another massive $70 billion+ buyback authorization and a dividend increase (forecast to increase by 5%) during the earnings call.
Analysts continue to see Apple as a long-term winner, believing that shares have more room to rise due to significant catalysts such as monetizing its installed base better, advertising-related revenue growth, Augmented/Virtual Reality opportunity, and long-term growth in Services. Bank of American price objective stays at $215; reiterate BUY.
Adjusting F2Q, slightly more cautious view on F3Q
Due to supply chain impact, Bank of America kept its F2Q/F3Q iPhone estimates at 56mn/46mn, slightly below market expectations of 57mn/49mn. Analysts' forecast for iPad is 15.4mn and 13.2mn, which is lower than market ests of 15mn/15mn. Analysts reduce their Mac est for F2Q by 300K units to be in-line with IDC est of $7.1mn.
• Analysts model Gross Margin of 42.5% for F2Q which is at the low-end of guidance range 42.5-43.5% and compared to Street at 43%.
Rev/EPS for F2Q are $92bn/$1.36 vs.Street at $93.9bn/$1.43.
Rev/EPS for F3Q are $83.3bn/$1.13 vs. Street at $86.2bn/$1.24. F3Q is typically a weaker iPhone quarter and investors will likely look to catalysts such as Apple Worldwide Developers Conference and the next iPhone launch event in Sep.
Lowering services estimate on APP store weakness
App Store rev growth slowed to 6% y/y in F2Q vs. 13% y/y in F1Q. While the App store data was weaker in F2Q there are some offsets in Licensing revs that can still lead to a mid-teens growth for services. Analysts reduce Apple F2Q services growth estimate to 16% y/y, from prior 20% y/y, and maintain F3Q Services growth estimate at 18% y/y. After the June qtr. y/y compares get easier for Services (and app store) revs and the estimates could have some upside for F4Q.
Here's a look at Apple valuation
Source:Bank of America
Source:Bank of America

Source: Bank of America
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