Unbeatable Apple: maintained at Overweight by J.P.Morgan

J.P.Morgan believes near-term estimates are instead resilient relative to the conservative guide already issued by the company on the last earnings call. For F3Q (Jun-end), better supply dynamics (as evidenced through lead times) will overwhelm the modest demand weakness seen till date as well as the incremental FX headwinds (of about 150 bps y/y on top of the 300 bps headwind y/y already baked into guidance), with the forecasts for revenue/ earnings now largely in line with sell-side consensus but better than buy-side expectations and sentiment. As highlighted on the last earnings call, the company was expecting an acceleration in supply headwinds in F3Q and an impact of $4-$8 bn, and JPM estimates the headwinds to be tracking below the lower-end of the range with product segments outside of Mac remaining relatively unaffected, although part of the upside is offset by adverse FX amounting to an incremental $1.2 bn revenue headwind in F3Q.

Contrary to the near-term, we see downside to medium-term estimates with iPhone and iPad sales most susceptible in our view to the softening consumer spending backdrop. That said, despite expectations now for a modest decline y/y in iPhone 14 sales relative to iPhone 13 (JPME -4% in C2H22), JPM sees the forecasts to be relatively resilient in the context of consumer tech companies and Apple is expected to stand out in relation to resilience to the macro.

JPM expects AAPL shares to be well-positioned for outperformance within the coverage universe in the case of: 1) a recession - which will showcase resilient iPhone demand driven by replacement cycles as well as high contribution of earnings mix from Services; and 2) stabilization of macro – limited downside risk, with potential upsides from a rapid consumer rebound.