Morgan Stanley predicts accelerated growth for Apple by September
William GallagherAn Apple Store logo
Investment bank Morgan Stanley's analysts are expecting Apple's June earnings to be as expected, but also claim that the quarter ending in September will see much higher growth.
Ahead of Apple's next earnings call on August 3, 2023, analysts are generally predicting a stable quarter.
Morgan Stanley, however, believes that this third-quarter earnings report will be followed by a "materially higher" fourth quarter, ending in September 2023.
"We expect a largely in-line June Q but see 4-9% upside to Sept Q rev/EPS, driven by relative strength in iPhone, Mac, Services & Gross Margins," the analysts tell investors in a note seen by AppleInsider. "History shows Apple outperforms by 5-10 pts after guiding the Sept Q higher, creating a positive setup into earnings next [week]."
The investment bank is maintaining its growth outlook, and says the August 3 earnings are a "positive stock catalyst that can help Apple shares re-rate towards our unchanged $220 price target.
Apple does of course launch new iPhones in September, but sales of those will mostly effect the following quarter. Nonetheless, Morgan Stanley says it remains "5-10% above Consensus in the September quarter, with upside to iPhone, Mac, Services and Gross Margins."
"Our updated September quarter forecast takes into account several factors," continue the analysts, including "1% lower iPhone shipments (48.5M units, down 0.5M units vs. our prior forecast) from minor high-end iPhone 15 build delays."
Morgan Stanley also predicts "slightly higher iPad units (13M vs. 12.5M prior)," "2% lower Mac revenue," and "1% higher Services revenue."
The analysts say that Street estimates for the company are "conservative given secular and cyclical tailwinds."
"Importantly, we believe this means Apple will guide to Y/Y revenue growth for the first time in 4 quarter[s]," says the report, "with the growth acceleration coming from the "right" segments — iPhone and Services."
Apple's earnings report is on August 3. Apple is expected by analyst consensus to report $1.19 in earnings per share, with $81.7 billion in sales.
Released during the quarter were the M2 MacBook Air 15-inch model, new Mac Studio, and new Mac Pro.
Revenue is expected to trend similarly YoY to Q2 as long as the macroeconomic outlook doesn't worsen. Foreign exchange is predicted to continue to be a headwind at 400 basis points.
Although, Apple CFO Luca Maestri believes services should grow similarly to the March quarter, even with advertising and gaming headwinds.
Maestri also said that the gross margin for the third quarter is estimated at 44% to 44.5%, and operating costs will range from $13.6 billion to $13.8 billion. Maestri also said that the strength of the Gross Margin can be attributed to a flat foreign exchange rate, which helps.
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2 Comments
If the shares do hit US$220 at the end of FQ4 that will be an increase of more than US$80 since Jan 1st this year. Just incredible.
Before I invested on a large scale, many years ago now, I didn't know much about self trading. I set up a small account as a test. I bought $5,000 of AAPL. Then I moved real money into AAPL in another account. The small $5,000 account has been untouched since. It is now just shy of $200,000. I can't believe what my main account is now at, it is mind blowing. Thank you Tim.