Wall Street Responds To Apple’s Blowout Earnings

Apple analysts were impressed by the latest solid quarter as the company reported growing revenue and record Mac and iPhone demand, despite flagging semiconductor shortage concerns. Goldman upgraded the stock to neutral from sell, while others bumped up their price targets and said they expect that strength will continue, despite some supply constraint concerns. The shares gained 3% in U.S. premarket trading, while some global suppliers also rose.

Goldman Sachs says that its original view that the iPhone cycle would disappoint because of Covid-19 was wrong; revises its estimates to reflect the beat and moves June revenue projection closer to consensus

• Current revenue levels may be hard to sustain, although high-end consumers have been more resilient in the pandemic than expected, says analyst Rod Hall
• PT increased to $130 from $83

Raymond James (outperform) says that it was a “solid” report from Apple, and it raises its June quarter estimates off the higher March numbers

• Sees the next iPhone cycle delivering the unit growth that failed to materialize last year due to the pandemic and late launch, writes analyst Chris Caso
• Increases PT to $185 from $160

Piper Sandler (overweight) says Apple significantly beat Street expectations on the top and bottom lines and that it is “impressive” that the June quarter gross margin will only decline 50bps sequentially

• Expects the company’s gross margin to expand as software and services become a bigger percentage of the mix, says analyst Harsh Kumar

Cowen (outperform) says Apple reported “exceptional” margins, with hardware strength likely to extend into 2022 and paid subscriptions to accelerate

• Raises earnings-per-share >10% on the strong iPhone cycle, gross margins, and services growth, says analyst Kris Sankar
• Raises PT to $180 from $153

Deutsche Bank (buy) says Mac and iPad demand stood out, with growing revenue continuing to come from the work- and school-from-home trend, plus the introduction of M1 chips into Macs

• However, there are expectations of supply constraints for the Mac and iPad in the third-quarter, which could cause around $3b-$4b headwind to revenue, say analysts in a note to clients
• PT increased to $165 from $160

Evercore ISI (outperform) says the quarter highlighted the “trifecta” of accelerating iPhone demand with 5G, expansion of gross-margins, and better monetization of services

• Company had a “blow-out quarter” and all of the above implies around >$5 earning-per-share potential for the stock, says analyst Amit Daryanani

Morgan Stanley (overweight) says it expects consensus to move toward its Street 2021 and 2022 revenue and earnings- per-share estimates because of sustained revenue trends

• Results won’t fully negate estimate risk concerns, but the strength will help lessen the risk to consensus 2022 estimates, writes analyst Katy Huberty
• Raises PT to $161 from $158

Source: Bloomberg