TD Cowen analysts weighed in on Apple (NASDAQ:AAPL) ahead of earnings on Thursday (08/03). While they continue to see moderate headwinds in its hardware business due to the macro environment, the analysts raised the price target on the stock to $220 (from $195) while keeping its bullish Outperform rating.
"We believe AAPL continues to see moderate headwinds in its hardware business due to the macro with iPhone demand stable overall while iPad, Mac, AirPods, and Watch products could see muted C2H seasonality based on our latest build forecasts," the analysts commented. "Our supply chain field work suggests no changes to near-term iPhone builds."
On iPhone, based on the firm's field research, it appears that C2Q/C3Q builds are at 42M/46M respectively. They are optimistic about the continuous growth in shipments to emerging markets, which they believe will remain a promising aspect. Recent checks also suggest that build expectations for the upcoming generation of the iPhone in C2H23 are estimated to be around 90-95M units, showing a flat year-on-year performance.
On services, the firm's model projects a 5% year-on-year growth, driven by continued expansion in subscriptions and steady licensing revenues, which align with the positive trends observed in search advertising.
Meanwhile, the analysts expect Mac and Wearables to see muted seasonality.
Net-net, "[e]ven with aggregate premium mobile and computing device demand down HSD %, CY23 FCF could be flattish," they commented. "We believe AAPL is still a defensive name and AI exposure via custom silicon is also a positive."