Apple to Outperform Q2 Estimates; Forecast Revenue and EPS of $55.1 Billion and $2.18: Morgan Stanley

Apple Inc, the world’s largest technology company by revenue, could outperform its second-quarter earning result consensus estimates on the back of better-than-expected hardware sell-in, according to Morgan Stanley analysts, who also forecast revenue and EPS of $55.1 billion and $2.18, respectively.

The California-based technology giant will release its second-quarter earnings result on Thursday, July 30, after the market close.

“June quarter results likely to outperform consensus estimates on the back of better than expected hardware sell-in. We currently forecast June quarter revenue and EPS of $55.1B and $2.18, 7% and 8% above current consensus estimates, respectively, on the back of stronger than expected intra-quarter data points across nearly all Product segments. We currently forecast $24.1B and $4.9B of iPhone and iPad revenue, respectively, in the June quarter vs. consensus of $22.4B and $4.9B,” Katy L. Huberty, equity analyst at Morgan Stanley said.

“We currently forecast June quarter Services revenue of $13.4B (+16.7% Y/Y), 1% above the consensus estimate of $13.2B (+15% Y/Y) and nearly 5 points higher than our original June quarter Services forecast largely due to record results from the App Store, which we estimate grew 30% Y/Y in the June quarter, the fastest quarterly growth in 3 years, as consumers remained at home for much of the quarte,” Huberty added.

Thirty-three analysts forecast the average price in 12 months at $367.45 with a high forecast of $450.00 and a low forecast of $250.00. The average price target represents a -0.81% decrease from the last price of $370.46. From those 33, 25 analysts rated ‘Buy’, six rated ‘Hold’ and two rated ‘Sell’, according to Tipranks.

Apple had its price objective upped by stock analysts at Wells Fargo to $420 from $400. Canaccord Genuity raised the target price to $444 from $310; BofA Global Research raised price objective to $410 from $390 and Needham raised its target price to $450 from $350. We also expect it is good to buy at the current level and target at least $420 as 50-day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity.

“Our $419 price target is sum-of-the-parts driven. We apply a 5.0x EV/Sales multiple on Apple’s mature hardware business (iPhone, iPad and Mac), a 4.9x EV/Sales multiple on Apple’s ‘Wearables, Home and Accessories’ business and a 7.7x EV/Sales multiple on Apple’s Services business, in-line with their respective peer groups. This results in an implied 5.5x target FY21 EV/Sales multiple and a 26.5x target FY21 P/E multiple,” Morgan Stanley’s Huberty added.

Positive FY21 consensus estimate revisions from 5G iPhone cycle; New product launches outperform expectations; Services growth accelerates more than we forecast and pent-up demand, Morgan Stanley highlighted as upside risks to Apple.

Weak global consumer spending on the heels of COVID-19 pandemic; Slower than expected ramp in new 5G iPhone production delays fall iPhone launch; Stiffer smartphone competition; Increased regulation, particularly around App Store, Morgan Stanley highlighted as downside risks.