Apple slightly ahead of Wall Street’s expectations in the September quarter, which included the launch of the iPhone 14 / Pro series, analysts’ attention has begun to shift to the crucial holiday quarter.
In a note to investors, investment bank Cowen predicted that Apple’s September quarter results would slightly beat Wall Street’s expectations but would be in line with guidance for the holiday quarter.
Cowen said Apple’s high-end iPhone was the main factor driving its revenue growth. However, demand for the iPhone 14 Plus fell short of analysts’ expectations, which was cited as a risk factor.
A report dated October 18 says Apple has cut production of the iPhone 14 Plus handset. According to DigiTimes, several supply chain manufacturers and channel vendors have confirmed that they have received notice from Apple to cut production of the iPhone 14 Plus by around 40 percent. Apple is shifting production away from the non-Pro models to produce more iPhone 14 Pro and iPhone 14 Pro Max devices, the latter two of which have seen a significant increase in parts shipments. total iPhone 14 Plus shipments could be revised down to around 10 million units in 2022.
Cowen forecasts that Apple will ship 51 million iPhones in the fiscal third quarter, which is in line with other industry analysts’ forecasts. Shipments in the fiscal fourth quarter are likely to be around 80 million units.
Analysts have slightly lowered their expectations for iPhone shipments in the December 2022 and March 2023 quarters to 82 million and 55 million respectively. Previous forecasts were for 83 million and 58 million.
Apple iPad and Mac sales are expected to show double-digit year-over-year growth, with increased enterprise adoption of iPad likely to help offset lower consumer demand.
Apple’s services business, which includes Apple Care, iCloud and others, is expected to grow +9 percent year-over-year in the fiscal third quarter. cowen expects improvement in the fiscal fourth quarter, forecasting +11 percent year-over-year growth, driven by increased App Store spending during the holiday season.
Cowen maintains its $200 price target on Apple stock AAPL, based on a multiple of 22x earnings for Apple’s hardware business and 39x recurring revenue for its services business. The bank estimates Apple’s natural year 2023 earnings per share at a blended 30x multiple of $6.65.
Apple AAPL stock has outperformed the Nasdaq by 12% and the S&P by 3% so far this year.
