Apple's Earnings Preview: Analyst Expects India To Gain 3%-4%, China To Decline 5%-6%

Piper Sandler analyst Harsh V. Kumar reiterated the Overweight rating on Apple Inc. AAPL with a price target of $171.

Kumar reduced estimates on Apple's December quarter guide ahead of earnings next week owing to a tough global phone environment, an initial weakness for iPhones in China, and slightly challenging compares for Mac and iPad.

Precisely, the analyst is ~$2.7 billion below the street for December 2023 quarter expectations, with the most significant factor being tough China comps, given local competition and a lackluster economy.

For the quarter to be reported, the analyst expects EPS of $1.36, with net sales of $87.781 billion.

While India will provide some recourse over declining China sales, the analyst doesn't think it will be enough to offset global and China's weaknesses. 

Kumar projects India gaining 3%-4% while China declines 5%-6%. The analyst lowered FY24 EPS to $$6.39 from $6.40.

The latest batch of iPhones is performing relatively similarly to the iPhone 14 series at the current stage of the release timeline, per the analyst. 

The analyst adds that the iPhone 15 Pro Max line is performing quite well compared to other models, which could provide Apple with a slight ASP tailwind this cycle.

On lead times, the analyst's checks indicate that the longest lead time for a new device is currently for the iPhone 15 Pro Max, which sits around 4-5 weeks. 

Additionally, the 15 Pro model is also seeing a strong number of upgrades, which has led to deliveries being pushed out roughly 2-3 weeks from the order date. 

However, demand for the standard iPhone 15 model and the 15 Plus model is roughly similar to the 14 series, if not weaker, the analyst adds.

On media reports of foldable iPads, the analyst says that if a potential foldable iPad is successful, it has every opportunity to move to the iPhone line in 2025. 

Additionally, this is a much-needed boost for the tablet segment and specifically the iPad, Kumar adds.

Kumar raised the FY25 EPS estimate to $6.88 from $6.77. 

Price Action: AAPL shares are trading higher by 0.73% to $168.10 on the last check Friday.