3 Near-Term Risks For Apple Bulls

Bernstein’s A.M. (Toni) Sacconaghi, Jr. expects Apple Inc. AAPL to report relatively in-line metrics when the company announces its FQ1:17 results after the close on January 31.

The analyst maintains an Outperform rating on the company, with a price target of $140.

Q1 Expectations

Sacconaghi expects Apple to report iPhone units at 75.1 million, with revenue of $77.4 billion and EPS of $3.23, within the guidance range.

“While we do think that Apple will likely meet estimates in FY Q1, iPhone data points have been mixed, and we see some possible downside to consensus estimates coming out of the quarter,” the analyst cautioned.

However, Sacconaghi also believes bulls are prepared for such an eventuality, as long as the estimate cuts are not material or “undermine” the iPhone “supercycle” expected in FY 2018.

The analyst expects the company to guide to Q2:17 revenue of $51 billion and EPS of $1.90–$1.95, with the midpoint of the gross margin guidance range at a minimum of 38.25 percent.

Near-Term Risks

At the same time, Sacconaghi also sees three near-term risks for Apple: “(1) Weaker iPhone growth in the March quarter; (2) Potential tax and tariff reform; (3) Weaker GM guidance due to in part to a stronger dollar and component prices.”

However, the analyst also expects iPhone’s installed base to be nearly 80 percent larger entering the iPhone 8 cycle, as compared to the iPhone 6 cycle.