Apple Stock Is a Winner, but How Much Higher Can It Go?

Microsoft’s latest financial statement was a good one, and the only company boasting a bigger market cap will try to match the outperformance when it reports March quarter earnings next week. That company is Apple (NASDAQ:AAPL) of course, whose F2Q report will be released after the market close next Thursday (May 4th).

Apple’s December quarter was marred by the Covid-driven disruptions to production which impacted iPhone sales but that should translate to better iPhone sales in F2Q. The tech giant anticipates year-over-year iPhone revenue growth to accelerate vs. F1Q’s 8% y/y decline.

Deutsche Bank analyst Sidney Ho thinks that should help offset softer sales elsewhere.

“Our latest checks with the supply chain and supported by our survey results suggest iPhone demand has been resilient with potential for further ASP tailwind, while Mac and iPad demand appears to have incrementally slowed,” the 5-star analyst explained. “We also believe supply constraints are no longer an issue for AAPL, while FX headwinds should be in line with guidance of -5ppts impact on revenue growth.”

Apple did not offer a sales guide for the quarter but did imply the revenue haul would closely resemble Q1’s 5% y/y drop. Considering this year’s F2Q had one less week in it compared to F1Q, Ho finds this outlook “encouraging.”

As for the numbers, Ho’s model calls for F2Q revenue of $93 billion (a 5% y/y drop and a 21% sequential decline) and EPS of $1.42. The Street has $93 billion and $1.43, respectively.

With AAPL shares outperforming so far this year (up 30% year-to-date vs. the S&P 500’s 8% increase), Ho believes it is the company’s “quality of earnings and strong balance sheet in an uncertain macro environment,” that have been attractive to investors. As such, he anticipates this “investor preference to continue.”

Therefore, ahead of the print, Ho has raised his price target for AAPL from $160 to $170, although that only leaves room for sparse returns of 4% from current levels. Ho’s rating stays a Buy. (To watch Ho’s track record, click here)

Turning now to the rest of the Street, where based on an additional 23 Buys, 4 Holds and 1 Sell, the analyst consensus rates the stock a Strong Buy. However, the average target currently stands at $175.41, implying the shares have room for 12-month gains of a modest 4%. (See Apple stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.


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