Apple Analysts Upbeat Ahead Of Tech Giant's Q3 Print: Why Earnings Could Be Positive Catalyst Driving Stock Higher

Apple, Inc. AAPL shares are getting hammered Wednesday as they get caught in the maelstrom of the weakness induced by Fitch's downgrade of the sovereign rating of the U.S.

The sell-off comes just ahead of the company's fiscal year third-quarter earnings release date.

Cupertino is scheduled to release its quarterly results Thursday after the market close.

Key Q3 Estimates: Apple is expected to report third-quarter earnings per share of $1.09 per share versus the $1.20 per share it reported a year ago.

The consensus revenue estimate models a 10.50% year-over-year decline to $74.24 billion.

Analysts' Take: Ahead of the earnings report JPMorgan analyst Samik Chatterjee reiterated an Overweight rating. As the analyst shifted his investment timeframe from 2023 to 2024, he issued a 2024 price target of $235, up from his 2023 price target of $190.

Wedbush analyst Daniel Ives maintained an Outperform rating and a 12-month price target of $220.

Morgan Stanley analyst Erik Woodring has an Overweight rating and a $220 price target. The tech giant is the firm's top pick.

Apple An Earnings Compounder, JPMorgan Says: “We see Apple well positioned to drive higher confidence from the upcoming earnings print as an ‘earnings compounder’ that continues to drive resilient performance,” said Chatterjee in a note.

As Apple moves away from the revenue declines that started in the December quarter of 2022 to potentially growing revenue in the September quarter of 2023, investors will likely be further convinced of the replacement cycle drivers for hardware products and diversified growth drivers in Services, the analyst said.

JPMorgan expects Apple to report above-consensus June quarter earnings per share and revenue of $1.23 and $81.9 billion, respectively. The upside will likely come from strength in iPhone, Mac and Services businesses, the analyst added.

Chatterjee also forecasts above-consensus September quarter guidance from the company, thanks to improving Chinese demand, ad revenue rebound for the Services segment and moderating forex headwinds. The analyst estimates revenue of $91.9 billion for the quarter.

See Also: Best Technology Stocks Right Now

Brace For In-Line To Above iPhone Revenue, Says Wedbush: Analyst Ives said his China checks suggest Apple could post at least in-line to above-consensus iPhone revenue for the September quarter.

The company may have benefited from a higher average selling price and increased iPhone 14 upgrade activity, he said.

This coupled with an uptick in Services revenue should keep Apple on track for at least an in-line quarter, Ives said.

Morgan Stanley Markedly Upbeat About September Quarter:  Analyst Woodring sees a setup for Apple where numbers will begin to move materially higher.

The company will likely post an in-line June quarter and guide September quarter revenue and gross margin materially higher than the consensus, the analyst said. He based his optimism on stable iPhone builds, seasonal Mac strength, low-teens Services growth, and continued secular and cyclical margin tailwinds.

“Importantly, this creates a setup where we expect positive estimates revisions post-earnings, after 5 consecutive quarters of Apple guiding forward quarter estimates below consensus,” the analyst said.

“As a result, we see earnings next Thursday as a positive stock catalyst that can help Apple shares re-rate towards our unchanged $220 price target,” he added.

The analyst calls for a double-digit year-over-year decline in iPhone and iPad revenue in the June quarter due to cycle dynamics and tougher comparisons. Mac revenue may have grown 4% and Services revenue is likely to have increased by 8.8%, thanks to 6% App Store growth, he added.

Apple Price Action: At last check, Apple shares were down 1.63% to $192.44, according to Benzinga Pro data.

Read Next: Weak iPhone Demand Could Lead To Apple’s Largest Q3 Revenue Drop Since 2016