Cowen expects solid Apple March quarter results, but is cautious on Q3

Apple is expected to report stable March quarter results that are in line with Wall Street consensus thanks to improving supply conditions, according to investment bank Cowen.

In a note to investors seen by AppleInsider, Cowen analyst Krish Sankar gives his outlook for Apple's March quarter results, which will be posted on April 28. His take is generally positive, with some caution thrown in for the upcoming June quarter.

All in all, he believes Apple will report revenue in line with forecasts thanks to healthy iPhone demand, Mac market share gains, and improving component supply conditions.

Sankar believes Apple iPhone builds in the March quarter reached 60 million units, higher than his original 58 million sell-in forecast. Builds are tracking a bit higher in the slower June quarter too, with Cowen seeing 46 million instead of 45 million builds.

When it comes to Services, Cowen believes that Apple's paid subscriptions have eclipsed the 800 million threshold in the March quarter — up from 785 million exiting 2021. For Q2 2022, he believes Apple will report flat quarter-over-quarter revenues because of pandemic disruptions to consumer behavior and the lack of new game approvals in China.

The analyst adds that he believes the premium mix of iPhone and Mac devices, as well as higher Services sales, can drive March quarter gross margins to the guided 42.5% to 43.5% range.

Heading into the June quarter, softer iPhone SE demand and lockdowns in key Chinese manufacturing cities could present a risk to Apple's bottom line, he added.

Sankar reiterates his Outperform rating for Apple and his 12-month price target of $200. The target is based on a 24x earnings multiple on Apple's core business and a 40x multiple on Services, leading to a blended price-to-earnings (P/E) multiple of 31x on Cowen's 2022 earnings-per-share estimate of $6.38.