Apple Earnings 'Not A Slam Dunk': 4 Analyst Takes On Tech Giant's Mixed Report

Silicon Valley tech giant Apple Inc AAPL issued first-quarter earnings and revenue that missed expectations for many of its lines of business on Thursday, sending the stock lower, prompting many of Wall Street’s top analysts to delve deeper into the company’s performance.

Earnings By The Numbers

• Apple issued earnings per share of $1.88 (10.9% lower year-over-year), missing consensus estimates of $1.94.
• The company booked $117.15 billion (down 5.49% year-over-year), missing consensus estimates of $121.1 billion.
• Mac revenues came in at $7.74 billion (down 28.66% year-over-year), against estimates of $9.63 billion.
• iPad revenues came in at $9.4 billion (up 29.66% year-over-year), against estimates of $7.76 billion.
• Gross margins were 42.96%, against the estimated 42.95%.

Morgan Stanley

• The investment bank reiterated Apple as its “top buy” for 2023, and left its $175 price target unchanged.
• “While we expect the macro environment to remain a year-over-year headwind in the March quarter, revenue growth is expected to improve by 6-7 [percentage] points vs. the December quarter,” Erik Woodring said in a note to investors Friday.
• “More importantly, Apple is guiding to decade-high gross margins in the March quarter (despite year-over-year revenue declines) and rationalizing opex such that our FY23 EPS falls just 1% despite the 4% cut to FY23 revenue," he added.

Bernstein

• Toni Sacconaghi Jr maintained a market perform rating on Apple, and left its price target unchanged at $125.
• “On one hand, [Apple's] revenues are not a slam dunk, revenues will almost certainly decline in full-year 2023, and valuation remains elevated vs. history and tech peers,” Sacconaghi said in a Friday note to investors.
• “On the other, numbers are being reset, and investors may begin to look forward to a better 2024, akin to 2019, when Apple last saw revenues decline. We see risk-reward on Apple as relatively neutral," he added.

Needham

• The investment bank issued a Buy rating on the stock, with a price target of $170.
• Apple “set all-time revenue records in Canada, Indonesia, Mexico, Spain, Turkey and Vietnam, plus quarterly rev records in Brazil and India,” Laura Martin wrote. The company returned $23 billion “to shareholders in the December quarter, made up of $3.8B of dividends plus $19B through open market repurchases of 133mm AAPL shares.”
• Needham’s overarching concern with Apple’s report is that the company blamed revenue weakness on supply shortages of iPhone 14 Pro and iPhone 14 Pro Max, the analyst said, adding “demand weakness is an equally plausible answer.”

Rosenblatt

• Barton Crockett maintained a Buy rating on Apple, but raised the price target from $165 to $173.
• “[Supply shortages were] all so weird that it should be looked past,” Crockett said. “Because of Covid production problems in China, Apple's most popular new iPhones — the 14 Pro and Pro Max — couldn't be bought in Nov. and Dec. in time for Christmas.”
• “The ~$7B disruption reflects people who traded down to the more affordable models that were in ample supply, or didn't buy an iPhone," the analyst continued. "But China has since reopened, and Apple says its supply chain is now operating normally. With China sprinting towards herd immunity, we assume disruptions are over.”

Price Action: Shares of Apple are trading 2.67% higher to $154.85, according to data from Benzinga Pro.

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