Morgan Stanley estimates Apple’s Q1 23 progress, $177 target
Morgan Stanley analyst, Erik Woodring called Apple’s Q4 numbers more accurately than most this time round, so what are his reactions to the company’s results? He made several valuable points in a letter shared with clients today:
Best of breed
Apple remains a solid investment with a strong ecosystem which has given it resilience in a tough season. It stands out above all the other big tech firms. He’s rating the stock at $177 per share. Apple beat consensus and its forward targets remain steady, despite so many challenges.
Managed by design
The analyst conceded that he would be “hard pressed” to find a company capable of operating at the level of consistency Apple has achieved. That’s across all its teams, in challenging circumstances, and shows the depth and ability of company management.
Apple is a “flight to quality outperformer amid elevated market volatility,” he says.
Big data
iPhone lead time and sell through data, App Store performance and currency fluctuations will be the most important metrics with which to assess resilience across the December quarter, he says.
Stable in a challenging world
Appe’s two string bow straddles hardware sales and services provision. How Apple has handled this has made it a “beacon of stability in an otherwise challenging market”.
Q1 23 guidance
Woodring speculates Apple’s directional guidance suggests revenue growth around 4-5% Y/Y growth in F1Q, or $129-130b of revenue (1% ahead of consensus). In terms of gross margin, the analysts anticipates as much as 42.5%-43.5%, with commodity costs helping boost the call. Apple is “outperforming on margins,” he says.
On services
For services, he argues the December quarter may mark a slight trough with growth aru9nd 5%, but sees things improving in subsequent quarters, reaching 7% growth in March and ending at 10% growth in FY23.
Editor’s note
I might point out that a successful new product launch (AR glasses?) of some kind might help increase use of Apple’s services, but this hasn’t happened or been announced, so Woodring will not have been able to account for this. In my book, Q2 23 has potential to be interesting, though don’t be too surprised to see that slip into Q3 so the company can drive hard and fast across the rest of the year.
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