Analysts defend Apple (AAPL) as earnings miss drags shares lower

Apple (NASDAQ: AAPL) shares opened lower in pre-market Friday after the tech titan reported weaker-than-expected earnings for the December quarter.

Apple reported EPS of $1.88 on revenue of $117.2 billion, missing the average analyst forecast for EPS of $1.94 on revenue of $121.88B. The company blamed soft results on a “difficult macro environment” and “supply constraints.” Sales of iPhone and Mac fell by 8.2% and 29%, respectively.

Despite analysts slashing their iPhone sales estimates, Apple still missed the consensus by about $2.5 billion ($65.78B vs consensus of $68.3B).

“As we all continue to navigate a challenging environment, we are proud to have our best lineup of products and services ever, and as always, we remain focused on the long term and are leading with our values in everything we do,” said Tim Cook, Apple’s CEO.

On the earnings call, the company offered better-than-expected guidance for gross margins for this quarter - c44% vs 43.1% consensus. Moreover, CEO Cook noted that the company is feeling a positive impact from a reopening in China.

Evercore ISI analyst Amit Daryanani reaffirmed the Outperform rating and a $190 per share price target.

“EPS & FCF estimates are staying intact if not moving higher from here despite a softer revenue environment. This print and guide continues to validate not just the diversity of AAPL’s revenue stream but also highlights the ‘consumer staple’ nature of iPhones vs. investor perception of iPhones as a discretionary technology product,” Daryanani said in a note.

Citi analyst Jim Suva has also jumped in to defend Apple, offering 5 reasons why shares can still trade higher.

1. India offers a material geographic expansion opportunity;
2. Sustainable iPhone revenues in 2023 given 1.2bln+ installed base;
3. Services Growth can improve;
4. When adjusted for FX, Apple sales were flat;
5. Platform expansion.

“We see consensus estimates moving slightly, with sales higher and EPS lower mostly due to FX, which is not a fundamental concern to us,” Suva added in a note.

On the other hand, Vital Knowledge’s Adam Crisafulli said Apple’s December quarter report was “disappointing, although people will be relieved that services performed as well as it did (a large miss on services would be worse than a miss on iPhone).”

Apple stock trades 3.4% lower in pre-market Friday.

By Senad Karaahmetovic

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