‘We Expect Apple to Beat Sept Q Expectations & Guide Constructively’

By Senad Karaahmetovic

Morgan Stanley analysts reiterated an Overweight rating and a $177 per share price target on Apple (NASDAQ:) shares ahead of FQ4 earnings.

The analysts expect the Cupertino-based tech titan to top analyst expectations for the September quarter and “guide constructively to the Dec Q.” Morgan Stanley’s estimates are up 2-4% above Street estimates for both September and December quarters.

The analysts highlight 3 key factors that will likely push Apple to offer positive guidelines.

1. iPhone, iPad, and Mac production has remained remarkably stable;
2. Record iPhone mix shift more than offsets FX headwinds; and
3. Apple has a 14-week quarter in F1Q23 (Dec Q), which we believe drives an acceleration in Y/Y Services revenue growth.

“Combined, these factors create a compelling setup where Apple grows revenue HSD Y/Y in both the Sept and Dec quarters (despite a 5-6 pt. FX headwind) while revenue for the rest of our consumer hardware universe is expected to decline 13% Y/Y and 9% Y/Y on average in C3Q and C4Q, respectively,” they told clients in a note.

Moreover, the analysts see room for a positive Apple stock reaction to earnings given that institutional investors are underweight Apple by 125bps. The analysts also believe that investors will continue to see Apple “as a flight to quality/more defensive late-cycle outperformer, an important factor underpinning our OW rating.”

Apple shares are down modestly in pre-open Wednesday after gaining nearly 1% yesterday to close at $143.75.