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Apple will see only limited near-term or medium-term risks because of the current macroeconomic conditions, according to investment bank JP Morgan.
In a note to investors seen by AppleInsider, JP Morgan analyst Samik Chatterjee answers a few frequently asked questions about the upcoming June Apple quarter results. Additionally, he also offers some predictions about Apple's near-term and medium-term situations.
Chatterjee still believes Apple is a safe haven stock for investors, given the resilience of the earnings estimates against the backdrop of macroeconomic deterioration. Although there's a chance for downside to Apple's current valuation, he expects the downside to be fairly limited.
The analyst sees only limited risks to Apple's fourth quarter of 2022 and first quarter of 2023. Because of that, Chatterjee is modestly raising his Apple estimates for Q3 2022 and Q4 2022.
Chatterjee's higher 2022 estimates are driven by better momentum and market share across Apple's hardware product portfolio, which will offset incremental headwinds from an adverse foreign exchange rates.
"The modest changes to our forecasts is primarily led by an increase to iPhone revenues," Chatterjee writes. "Recent acceleration of momentum in China in particular for iPhone demand [leads] us to raise our full-year FY22 volume forecast from 247 [million] to 252 [million] units, despite the headwinds from the Russia exit."
In the medium-term, the analyst believes there could be greater risks to Apple's iPhone 14 cycle because of the economic situation.
The aforementioned foreign exchange rate issue could make iPhone 14 pricing more expensive in international markets. With higher-end models becoming more unaffordable, Chatterjee believes there will be a mixing-down among consumers.
However, going forward, the analyst still believes that Apple will be able to offset those medium-term risks because of relatively weak competition from 5G device rivals, as well as iPad and Mac market share increases.
The analyst is maintaining his 12-month price Apple stock price target of $200. The estimate is based on a price-to-earnings (P/E) multiple of 30x on his 2023 earnings estimate of $6.64.
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4 Comments
It's almost always a good time to buy AAPL. Some times are better than others (like 2-3 weeks ago when it got close to $130), but if you buy and forget for a year or two or longer you will always do well in the end.
IDK why Wall Street still hasn't properly valued AAPL, for all the reasons mentioned in this article and much more. In difficult times, Apple still does well and better than most. They have an amazing product pipeline, even if we still have no idea what shape the AR/VR products or Project Titan will take. Then there's Services, which has a stratospheric margin and continues to grow and grow. Then there's that hypermassive pile of gold they're bringing in and doling out to shareholders in the forms of a very sustainable dividend payment and stock buybacks.
I made a lot of money in AAPL over the years, but I'm out of it now because the dependence on China scares me.
Chinese labor is to Apple what Russian gas is to Germany -- a deal with the devil sealed with a monkey-paw handshake.