Apple Inc. painted a mixed of the current quarter when reporting earnings late Thursday, as it deals with the effects of the COVID-19 pandemic, sparking debate about what’s in store for the company in the coming months.
Apple shares were up 0.8% in Friday morning trading, reversing declines from earlier in the session.
The lack of a numerical forecast “means more uncertainty in an already uncertain time,” wrote Piper Sandler analyst Harsh Kumar. While Apple indicated that the China business has been improving since hitting a February bottom and that other parts of the business picked up toward the end of April, Kumar said that “the recovery through the rest of the quarter is still uncertain.”
He rates Apple shares at overweight while raising his price target to $310 from $300.
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Citi analyst Jim Suva wrote that Apple’s decision to withhold guidance “was a surprise to us” as the company still provided forecasts back in the 2008 financial crisis.
“We recognize that near-term minded investors will find plenty of items to support a negative view on the stock (notably the removal of quarterly guidance) but we believe in the weeks and months ahead, consensus will look back and realize Apple’s decisions were not only caring and prudent but also that consumers will elevate the brand and products even higher going into the new 5G product launch,” Suva wrote.
He expects that the company will still announce its 5G iPhones in September but make them available in October. Suva previously expected the devices would be available for purchase in September as well.
He rates the stock a buy with a $310 target price.
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D.A. Davidson analyst Tom Forte wrote that Apple’s commentary on getting a boost in some categories from stay-at-home trends was “encouraging, but, in and of itself,…does not assure sustained revenue growth.”
At the same time, he was intrigued by what the current climate means for Apple’s recently announced iPhone SE, a lower-priced model. “We remain encouraged that, while this has not historically been its forte (so to speak), the current set up has it well positioned for its value-priced iPhone to be its most important iPhone this year,” Forte wrote, while maintaining a buy rating but lowering his price target to $355 from $370.
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Apple Chief Executive Tim Cook, for his part, said in response to an analyst’s question on Apple’s earnings call that he hadn’t noticed consumers “buying down” to this cheaper model due to economic conditions.
Bernstein’s Toni Sacconaghi wrote that Apple’s management seemed to call April as the bottom for the business. “On net, we encouragingly expect FY20 revenue and EPS to be close to flat year over year amid the worst recession in recent memory, underscoring the resiliency of Apple’s portfolio,” he wrote as he maintained a market perform rating and $285 price target on Apple shares.
But Sacconaghi also argued that this fiscal year “really doesn’t matter to the Apple investment thesis” as the bull case for Apple rested on a 5G upgrade cycle in fiscal 2021.
“Arguably, weak iPhone sales in 2019 and 2020 reinforce the case for a strong 2021,” he wrote. “We estimate iPhone replacement cycles are approaching 4.5+ years (vs. ~3 years in 2018).”
At least 12 analysts raised their price targets on Apple after the report, according to FactSet, while at least three lowered their targets. Of the 41 analysts tracked by FactSet who cover Apple’s stock, 28 rate it a buy, nine rate it a hold, and four rate it a sell, with an average price target of $315.57.
Apple shares are up 0.5% so far this year as the Dow Jones Industrial Average
DJIA,
-2.62%
has fallen 16%.
