iPhone, Mac driving June quarter results in-line with Wall Street forecasts

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Apple is likely to report a June quarter that lines up with current Wall Street predictions despite macro challenges, thanks to healthy iPhone and Mac demand, investment bank Cowen says.

In a note to investors seen by AppleInsider, Cowen lead analyst Krish Sankar offers his thoughts on the upcoming Apple earnings report on July 28. Despite supply constraints and macroeconomic issues, he says that Apple "remains a defensive name."

Healthy iPhone and Mac demand will drive the company's performance during the quarter. Given improvements in supply constraints and Chinese Covid lockdowns, Sankar has also revised his forecast to up June quarter iPhone shipments.

The analyst is expecting Apple to report revenue of $82.4 billion in the June quarter and an EPS of $1.14.

Cowen says that iPhone builds are now tracking at 46 million units, higher than its previous forecast of 43 million. Mac and iPad shipments are likely to be down quarter-over-quarter, but Sankar says that the Mac likely gained market share in the first half of the year.

Because of lockdowns early in the June quarter, Sankar believes that Services revenue will decelerate to 10% year-over-year in Apple's June quarter. He still believes that Services will grow 13% in the fourth quarter, depending on factors related to recovery in China and Eastern Europe.

Looking ahead, Sankar offers a blended view of the potential forecast.

"Given increasing concerns of a recession, we lowered our CY23 iPhone sell-in forecast on potentially slower demand for premium devices. However, a macro slowdown could also impact other hardware and service offerings," he said.

If hardware product shipments decline 10%, for example, Sankar believes there will be a -7% revenue impact and a 12% earnings-per-share (EPS) impact. If shipments fall 20%, those other two numbers will be 14% and 22%, respectively.

Sankar maintains his 12-month Apple price target of $200, which is based on a sum-of-the-parts valuation by applying a 22x earnings multiple on Apple's core hardware business and a 39x earnings multiple on Services. That results in a blended 30x price-to-earnings multiple on his 2023 estimated DPS of $6.65.