Apple will hit revenue expectations in Q3 on solid iPhone demand, Wedbush says

Apple is likely to hit Wall Street expectations when reporting its June quarter earnings despite macroeconomic headwinds, according to Wedbush.

In a note to investors seen by AppleInsider, Wedbush analyst Daniel Ives says that he sees iPhone demand holding up slightly better than expected amid supply issues plaguing the tech industry. He believes Apple will hit consensus numbers during its Q3 2022.

Analysts are expecting Apple to report revenue around $82 billion and earnings-per-share of $1.16 in the June quarter.

However, Wall Street is still expecting weakness from Apple during the June quarter. According to Ives, "all eyes" are on the iPhone 14 production and demand cycle. Apple is also focused on an aggressive product pipeline heading into 2023, which could include a new mixed-reality headset.

The June quarter will represent the "peak worry" for Apple's supply chain issues. Although Apple warned of a $4 billion to $8 billion revenue hit, Ives expects any Covid or supply disruptions to subside in the September and December quarters.

As is typical, Apple's installed base is its key to weathering the macroeconomic storms. Ives still believes in the stickiness of the iPhone upgrade cycle, since roughly 240 million out of Apple's 1 billion iPhone users have not yet upgraded their devices.

Services also looks strong heading into the latter half of 2022, as well as 2023. Ives believes Apple's Services sector is worth more than $1 trillion on its own. When combined with its hardware, he believes the risk/reward is "very compelling at current levels."

"While the nervous market backdrop is creating a fearful environment for tech stocks, we believe Apple's growth story remains well intact despite the shaky macro," Ives said.

Ives maintains his Outperform rating for Apple and 12-month price target of $200. His target is based on a sum-of-the-parts valuation on his 2022 estimates, which breaks down to a 18x multiple on Services at $1.5 trillion and a 7x multiple on Apple's hardware business at $2.1 trillion.