iPhone demand in China and India to bolster Q3 results

TD Cowen has increased its price target for Apple to $220, with iPhone shipments to emerging markets a "bright spot" in the upcoming Q3 2023 financial results.

Apple is announcing its Q3 2023 quarterly results on Thursday, and continuing with analyst tradition, TD Cowen has issued its own predictions for Apple's financial status.

In Tuesday's note seen by AppleInsider, TD Cowen models Apple as reporting revenues that are down 2% year-on-year, which will be in line with Wall Street forecasts. Like other analysts, Cowen believes the September quarter will do better, with a year-on-year increase of 1% as a guide.

For the June quarter, Apple will apparently report "moderate headwinds" in its hardware business, with a stable iPhone demand and muted seasonality for iPad, Mac, AirPods, and Apple Watch.

Unit sell-in for iPhones are modeled at 42 million for Q3 and 48 million for Q4, generally at a 3% YoY reduction. The figures are largely supported by market share gains in China and India, the analysts observe, as "shipments to emerging markets will remain a bright spot."

For iPad and Mac, second-quarter shipments are thought to be down due to macros, and for the second half of 2023 to be "below seasonal." Shipments in the back half of the year may be flat or up slightly, with consumer spending remaining "impacted."

The Services business is set to see 5% year-on-year growth due to increases in subscriptions and in-line licensing revenues. An acceleration of revenue is also expected back to double-digit growth in the future.

The wearables section covering Apple Watch and AirPods should be "down modestly" for the June quarter. Following fieldwork, they are modeled for a "lower level of C4Q shipments due to softer consumer trends," with build forecasts for the Apple Watch forecast to worsen from -7% for the full calendar year to -10%, and -5% and -18% respectively for AirPods.

From a stock standpoint, Apple is still a "defensive name" supported by iPhone demand, Services revenue streams, and annual capital returns of $90 billion to $100 billion. With Apple's experience with the Neural Engine in its self-designed chips, this also gives Apple a considerable advantage when dealing with future AI trends.

Previously setting a price target for Apple of $195, TD Cowen now rates Apple as "Outperform" with a new price target of $220.