Apple Has 'Better Days Ahead,' Analysts Say After Q1 Earnings Beat

Apple Inc. AAPL has a better outlook in the long-term, analysts said as the company reported a first-quarter earnings beat on Thursday.

Business Will ‘Stabilize' By September, Munster Says

Loup Ventures Managing Partner Gene Munster said Apple's revenue growth of 1% posted in Q1 is a "win," as it was one of most at-risk large technology companies in the United States from the novel coronavirus (COVID-19) outbreak.

Apple's hardware supply-chain and its manufacturing base in China both made the company severely exposed to the pandemic, making its Q1 results all the more impressive, Munster noted.

The former research analyst added that the March earnings report suggests the company is keeping up to manage the business for long-term revenue growth and profitability.

Apple has maintained the release schedule of its products and its planned investments in future products and services. "This approach will likely yield a stronger product roadmap versus other competitors and larger growth opportunities in 2021," he said.

The Cupertino-based company didn't give guidance for the second quarter due to COVID-19 uncertainty, but Munster expects its revenue to drop 5% to 10%. He said Apple's business is likely to "stabilize" in the third quarter.

According to Munster, Apple's strong cash position will also strengthen its long-term goals. The company posted a Q1 GAAP net income of $11.3 billion, while Amazon.com Inc. AMZN, which has a similar valuation at $1.2 trillion, posted $2.5 billion GAAP net income, he noted.

Apple's 5G smartphones, streaming video-on-demand service accompanied by original content, software services, health wearables, and augmented reality products are the trends that will continue to be in place even after the pandemic, contributing in long-term, Munster said.

'Major Feat In A Dark Storm,' Wedbush Says

Wedbush Securities Inc. analysts said Apple's Q1 results were like a "major feat in a dark storm," as the company managed to beat the Wall Street estimates despite the global lockdown significantly affecting its retail business and supply chain.

According to the analysts, new iPhone sales will be limited over the next 18 to 24 months, as it expects only its existing customers, who haven't upgraded to a later version of the smartphone in more than 42 months, to make new purchases. This number comes to about 350 million, Wedbush noted.

The investment firm believes it is "prudent" of Apple to not give June guidance, even if it causes a drop at the stock market due to knee-jerk reaction, as the number of variables due to the pandemic makes it a "game of blindfolded darts."

The core focus of investors will be on the September quarter and the 2021 financial year, it said.
Wedbush maintained its "outperform" rating on Apple stock, with a price target of $335, as it said the company has "better days ahead."

Apple Price Action

Apple shares closed 2.1% higher at $293.80 on Thursday. The shares traded 2.6% lower at $286.30 in the after-hours session.