Apple Could Crush Earnings Estimates. One Analyst Explains How.


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Evercore ISI’s Amit Daryanani repeated his Outperform rating and $175 target price on Apple shares.


Mladen Antonov/AFP via Getty Images

While you weren’t looking,

Apple

shares have rallied about 12% over the past two weeks, as investors turn their attention to the company’s upcoming March-quarter financial results. There are reasons to think more gains could follow.

Evercore ISI analyst
Amit Daryanani
this morning repeated his Outperform rating and $175 target price on Apple shares (ticker: AAPL), while adding the stock to the firm’s Tactical Outperform list.

The analyst thinks Apple is “well-positioned to report upside to March quarter estimates,” driven by strong performance by both iPhone and services, and despite ongoing component shortages.

“While the supply chain issues are real, we expect Apple will be relatively protected by its status as one of the largest electronics purchasers in the world,” Daryanani writes in a research note. He points out that Foxconn, a key Apple manufacturing partner, has called out the tight supply of parts but said it would affect less than 10% of customer orders.

Meanwhile, he notes that iPhone shipments in China were up 185% in the first two months of the quarter, while the App Store saw 32% growth in the quarter. He notes that Apple had guided to some deceleration in services in the quarter after 30% growth in the December quarter, but he sees potential that the growth will be steady or better given strength in the App Store.

In short, Daryanani thinks Apple is positioned to report “sizable upside” versus expectations for the March quarter, with June guidance likely to be in line with expectations or better. Long term, he thinks the company can sustain mid-to-high single-digit sales growth and low-teens earnings-per-share growth.

Apple is due to report earnings on April 28. Current Street consensus calls for revenue of $77 billion and profits of 98 cents a share.

Apple stock is down 1.8%, at $132.85, in recent trading. The

S&P 500

is flat.

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