Apple Stock Could Get Bumpy as Earnings Approach - Barron's

Photograph by Vasanth

Apple stock could be in for a bumpy ride over the next few weeks as investors sort out expectations for what might be a difficult June quarter earnings report.

Citigroup analyst Jim Suva cautioned Tuesday that “share price volatility” is likely for Apple (ticker: AAPL) in the months ahead as “consensus estimates calibrate lower.” Suva, who in late May slashed his expectations for iPhone sales in China by 50%, noted that his estimates for both the June and September quarters are below consensus for sales and earnings. He noted that Apple stock is not necessarily expensive—he maintains a Buy rating—but added that “consensus is simply too high.” His price target is $205, just a few points above the stock’s current level.

Apple stock, which rallied Monday on signs of abating trade tensions with China, was up 0.5% in Tuesday morning trading, to $202.69 per share. The Dow Jones Industrial Average was off slightly.

For the June quarter, Suva estimated revenue of $52.6 billion, with iPhone revenues down 12% to $25.76 billion, and profits of $2.06 per share. Wall Street consensus estimates call for revenue of $53.35 billion, iPhone revenues of $26.2 billion, and profits of $2.10 per share. For the September quarter, Suva’s forecast is for revenue of $55.9 billion and profits of $2.42 per share, well below the Wall Street consensus of $61.05 billion and $2.68 per share, respectively.

Apple reports earnings on July 30.

In his note Tuesday, Suva also reviewed his expectations for the fall 2019 iPhone lineup, which he thinks will have “relatively muted hardware enhancements,” with updated cameras the most significant upgrade.

“At this point, the new phone lineup does not appear to be [a] major upgrade,” he wrote. Apple is not expected to launch 5G-capable phones until fall 2020.

Write to Eric J. Savitz at eric.savitz@barrons.com

Let's block ads! (Why?)