By Senad Karaahmetovic
A Bank of America analyst slashed the price target on Apple (NASDAQ:AAPL) stock to $185 from $200 heading into the FQ3 results.
He sees a “significant incremental headwind” from the strong U.S. dollar. While Apple had guided for 300bps y/y FX headwind for F3Q, the analyst sees FX as a 5% y/y headwind.
“We further estimate a 7% y/y headwind to revenues in F4Q (-$6bn y/y impact). These y/y estimates do not account for the impact of currency hedges, which could modestly lower the impact. Product gross margins could see a 100bps compression offset partially by higher services mix resulting in ~60bps of sequential gross margin pressure,” he added in a client note.
The lowered price target reflects slashed FY22 revenue/EPS estimates to $390 billion/$5.94 from $392 billion/$6.03, respectively.
The analyst is also concerned about the outlook for the September quarter. Although he sees better supply, he also notes weaker demand in China, related to lockdowns.
“Given the recent rally in shares, we would not be surprised to see a transitory pullback on a weaker guide but we reiterate Buy on upcoming product cycles, long-term growth in Services, opportunity to monetize the installed base, & strong capital returns,” the analyst concluded.