Citi: Why Apple Shareholders Should 'Expect A Beat' In Q2

In a new report, Citi Research analyst Jim Suva discusses Citi’s latest Apple Inc AAPL supply chain checks and explains why Citi remains bullish on the world’s largest company. Suva believes that Apple shareholders should “expect a beat” this earnings season.

The numbers
After Citi’s most recent round of global supply checks, the feedback obtained indicates that demand for the iPhone remains robust. In fact, Citi is confident enough in the strength of the latest numbers to boost its iPhone unit estimates from 46 million to 49 million, more than 6.0 percent higher than consensus estimates of 46 million.

Share price driver
Citi is calling for a slight beat by Apple in the June quarter, forecasting $1.79 per share in earnings versus consensus estimates of $1.76. However, Suva believes that the success of new products and services will drive share prices more than the bottom line.

“Investor focus will be on commentary around new product (6S launch, enterprise grade 12” iPad) and services (Apple Pay in the UK, Apple Music, Apple TV?) launch and traction within their installed base will likely be a key driver of the stock in the interim,” he explains.

What to watch for
According to Suva, Apple shareholders have several key issues to watch in coming months. Those issues include continuing iPhone sales growth, global roll-out and performance of Apple Pay, slowing smartphone sales in China, the launch of enterprise grade iPads and the performance of Apple Music.

Outlook
Overall, Citi remains bullish on Apple. The firm has a Buy rating on Apple and a $145 target for the stock.