Proactive Investors - Apple Inc (NASDAQ:AAPL, ETR:APC)'s price target has been lowered by Morgan Stanley (NYSE:NYSE:MS) analysts ahead of its fiscal second quarter 2024 earnings due on Thursday, May 2.
They reduced their price target from $220 to $210 but repeated their ‘Overweight’ rating on Apple.
Shares of Apple traded hands at about $165 on Monday morning.
For fiscal 2Q, the analysts believe Apple will slightly beat estimates but will guide revenue and implied earnings per share (EPS) for the June quarter 4% to 7% below expectations.
“At $165, this appears priced in but in today’s volatile market, it’s a tricky setup,” the analysts wrote in a note to clients.
The analysts wrote that they would buy any post-earnings weakness in Apple stock. However, they believe there’s a chance Apple could see a relief rally/squeeze higher on a better-than-feared earnings report and guidance.
They expect the Q2 earnings beat to be driven by stable demand for iPhones and iPads, slight Mac shipment upside, and Services outperformance.
They project revenue of $91 billion and EPS of $1.51, above the Wall Street consensus of $89.8 billion and $1.50 respectively.
Investors will be watching Apple’s performance in China, its updated capital return framework, and capital expenses, they believe.
They expect Apple to increase its share buyback authorization by $90 billion, and a mid-single-digit year-over-year increase to its dividend to $0.26 per quarter.
Bank of America (NYSE:BAC) analysts also see Apple outperforming expectations in Q2, forecasting $91.5 billion in revenue and EPS of $1.53.
They forecast up to $1 billion from Vision Pro sales which they believe is not likely reflected in Street estimates.
“While we acknowledge that the demand environment is weak, we believe the stock is already reflecting this (down 14% in the year-to-date) and our aggregate estimates for the year remain relatively unchanged,” the BofA analysts wrote.
They reiterated their ‘Buy’ and $225 price target on Apple on their thesis it will benefit from GenAI with gross margin upside and momentum in Services.
Catalysts ahead include Gen AI announcements and the launch of the new iPhone 16s in the fall, with their checks indicating that Apple could launch four new iPhone models with the A18 application processor to enable improved AI/machine learning performance.
The Morgan Stanley (NYSE:MS) analysts also pointed to an underappreciated Edge AI iPhone 16 cycle, Services growth, resilient gross margins, new product launches, and a potential future hardware subscription/bundle offering as catalysts driving their ‘Overweight’ rating on Apple.