According to investment bank Cowen, Apple will likely report stable March quarter results due to improving supply chain conditions. However, the stability is expected to take a hit in the upcoming June quarter.
Low demand for iPhone SE and lockdowns in China could have a significant impact on Apple’s Q3 earnings
In a note, to investors seen by AppleInsider, Cowen analyst Krish Sankar offers his observation for Apple’s upcoming March quarter results, which will be released on April 28. Sankar’s outlook for the tech giant is quite favorable but there he does share some concerns for the upcoming June quarter.
Overall, the analyst believes that the Cupertino tech giant will report high revenue in line with earlier predictions due to stable demand for iPhones and Macs along with improving component supply chain conditions. Furthermore, Sankar believes Apple iPhone builds sold in the March quarter reached 60 million units, higher than his original prediction of 58 million. Builds are expected to track a bit higher in the June quarter as well, with the analyst seeing 46 million instead of 45 million builds.
In terms of Services, Cowen predicts Apple’s paid subscriptions reached 800 million in the March quarter — up from 785 million exiting 2021. In addition, Sankar believes that the Cupertino tech giant will report flat quarter-over-quarter revenues because of ups and downs in consumer behavior and the lack of new game approvals in China.
The analyst further adds that the premium mix of iPhones and Macs as well as higher Services sales can propel March quarter gross margins to the expected 42.5% to 43.5% range.
As for the upcoming June quarter, low demand for the third-generation iPhone SE as well lockdowns in Chinese cities that are important in manufacturing could cause a dip in Apple’s earnings. It was previously reported that production delays of a few weeks would be manageable for Apple, however, if the lockdown lasts longer than two months, it may be difficult for the company to recover.
Lastly, Sankar revealed his Outperform rating for the tech giant and his 12-month price target of $200. The target is based on a 24x earnings multiple on Apple’s core business and a 40x multiple on Services leading to an earnings-per-share estimate of $6.38.
