Wedbush says Apple's earnings won't be dented by falling China demand

In September 2023, Wedbush raised its price target for Apple to $240, based on the iPhone 15's "impressive event," plus its own supply chain checks. In a note to investors seen by AppleInsider, the investment firm is maintaining that price, and while it says Apple has weaknesses, none of them "move the needle on the stock in our opinion."

Apple will issue its fourth fiscal quarter results on November 2, 2023. It's traditionally a strong quarter for the company because of the launch of the latest iPhone, but this time there have been doubts over its expected earnings.

Piper Sandler, for instance, has reduced its earnings estimates because of weaker demand for the iPhone 15 in China, compared to that for the iPhone 14 in 2022. Oppenheimer has lowered its target for the same reason.

"Right now the overall sentiment of Apple on the Street is a negative 'groupthinak mentality' heading into the print that we view as very disconnected from the current iPhone 15 growth we see in the field," says Wedbush, "based on our recent checks and trip to Asia that gives us a high level of confidence in owning Apple at these levels."

"The elephant in the room this quarter is clearly China demand around iPhone 15 units which appears to have slowed the last month after coming out of the gates strong with pre-order activity," continues the report. "To this point, we believe Cook will have a generally positive tone on the call around China iPhone demand for the December quarter despite massively negative Street sentiment building around the Cupertino story."

That positive tone will be because "we believe over 100 million iPhones in China alone are in the window of an upgrade opportunity and that remains the golden goose on this cycle."

"Overall we believe for the December quarter iPhone revenue will be up year over year and not down," says Wedbush.

The company is not expecting more than "a slight upside in the September quarter led by a stronger Services growth now back to double digits with iPhone unit demand activity in the US/Europe key this quarter."

"Mac and iPad remain weak and have tough comparables," continues Wedbusy, "[but this quarter's results are] all about iPhone 15 demand and Services growth back in the double digits for FY24."

"With Service revenue back to double digit growth and iPhone units that should be in the ~225 million range for FY24," says the company, "we believe the 'growth demise story' of Apple being spun by bears is a dynamic we have seen constantly over the past decade and this is just another chapter in that book."

Wedbush's point about constantly seeing predictions of a demise does fit with the pattern for how Apple usually beats expectations.