By Senad Karaahmetovic
Apple (NASDAQ:AAPL) is due to report its FQ3 earnings on July 28 with the Street calling for EPS of $1.16 on revenue of $82.57 billion.
KeyBanc analyst Brandon Nispel sees a “difficult setup” for Apple, although some challenges facing the tech giant are already priced in, he told clients in a note.
“We believe the quarter setup is notably difficult from: 1) supply chain constraints of $4.0B- $8.0B; 2) 150 bps y/y negative impact from Russia/Ukraine; and 3) China lockdowns; paired with 4) worsening FX that was already guided 300 bps lower y/y (strengthening USD vs. euro and yen key concern); and 5) concerns around the U.S. consumer's health,” Nispel wrote in a note.
KeyBanc’s credit and debit card data shows that spending was down -by 4% m/m in June. More importantly, the KFLD shows Index Spend fell by -18% q/q, weaker than the prior 3-year average of +12%, for the second quarter of this year.
“Historically, Apple's F3Q Apple Hardware is -6.0% q/q over the last 3 years, which compares to the current F3Q22 q/q consensus estimate of -19%. In other words, consensus expects a weak growth quarter, though we see certain factors that were not anticipated that could result in results coming in below consensus,” Nispel added.
As a result, the analyst cut the price target on Apple to $173 per share from $191 on “weakness we are seeing in our data, and macro data points.”
On the other hand, BofA analyst Wamsi Mohan reiterated a Buy rating and a $200 per share price target on Apple stock as demand remains healthy.
“The successive reduction in iPhone trade-in prices and lower Apple trade in prices vs 3rd parties indicates that demand for the iPhone remains healthy. Maintain Buy on multiple tailwinds on both hardware and services (user growth, ASP, and increased penetration of installed base),” Mohan said in a research note.