By Senad Karaahmetovic
Deutsche Bank analysts have weighed in on Apple (NASDAQ:AAPL) as the Cupertino-based titan prepares to report this Thursday. They expect Apple to report in-line FQ4 results as easing supply chain challenges are likely to offset weakness in some business sectors.
Deutsche Bank's latest checks showed only iPhone 14 Pro and iPad Air are seeing extended delivery times. The analysts forecast that Apple sold about 51 million iPhone units in its fiscal fourth quarter, leading to iPhone revenue of $44.8 billion. The Street consensus stands at 52 million iPhone units on revenue of $42.6 billion.
However, Apple’s other sectors may experience a bigger-than-expected slowdown.
“For the services business, while the company already guided revenue to decelerate from the F3Q level of +12% y/y (vs. DBe of +10% y/y in F4Q), we still see potential for downside due to further headwind from FX and digital advertising. We also see weaker consumer demand impacting AAPL’s product business, but we think AAPL should fare better than many of its smartphone/PC peers with product revenue growth of +8% y/y,” the analysts said in a client note.
Elsewhere, they also shared key takeaways from Deutsche Bank's survey that showed 43% of respondents are "very" or "somewhat" likely to purchase a new smartphone over the next three months.
“Among the survey participants who intend to buy a new iPhone, ~41% indicated that they will likely purchase iPhone 14 Pro Max (31%) or iPhone 14 Pro (10%), while only 18% suggested they plan to buy iPhone 14 (10%) or iPhone 14 Plus (8%),” they added.
Overall, Deutsche Bank analysts see the biggest risk for Apple stock from the management commentary on demand, as well as the company’s guidelines for FQ1 that could fall below Street estimates.
“We do think the slower growth is already anticipated by the market, especially given recent media reports suggesting AAPL is cutting iPhone orders and that the stock has pulled back ~20% from its August peak. We also believe the company’s strong balance sheet will shine in the current environment, supporting its dividend payments and share repurchases totaling $100b+ annually.”
“With investor expectations already low heading into earnings and the stock trading at a reasonable valuation (at ~22x CY23E EPS), we believe the risk-reward profile is attractive and we maintain our Buy rating,” they concluded.