Investors should prepare for Apple’s lower forward guidance as Bank of America has reiterated a neutral rating on the company’s stock. The bank has updated its price target to $173 per share, representing a 2% increase from Friday’s closing price. Previously, Bank of America had set a price target of $168.
Expectations for Apple’s Quarterly Results
Apple is scheduled to report its quarterly results on Thursday after the closing bell. According to research analyst Wamsi Mohan, the firm expects Apple to meet consensus expectations on both earnings per share and revenue for the fiscal second quarter. Bank of America predicts earnings of $1.40 per share on revenue of $92.4 billion, compared to the Street’s expectations of $1.43 in earnings per share and $92.9 billion.
Mohan believes that stronger iPhone demand will offset the weakness in other hardware categories. He also expects Services to benefit from subscription growth, while the App Store may remain weak.
Concerns for Apple’s Third-Quarter Estimates
Bank of America is anticipating gloomy outlook from Apple, as it predicts that fiscal third-quarter estimates could suggest a 1% year-over-year decline in revenue. For that period, the firm forecasts earnings of $1.17 per share and revenue of $81.7 billion due to weaker consumer spending and FX headwinds.
Asset management firm Bernstein also expressed concerns regarding Apple last week, citing challenging macroeconomic headwinds for both Macs and iPads. Mohan added that lower consumer spend and slowing Enterprise spending could also pose challenges for Apple.
Mohan further noted that ongoing negotiations with Google and the rise of search engine Bing could be points of contention for Apple. If a large smartphone company like Samsung were to move away from Google, it could put pressure on the search engine to increase payments to Apple to remain the default on the iOS platform.
Another key question for the company is the size of Apple’s expected stock buyback. Mohan predicts an authorization of $80 billion in buybacks, which is slightly lower than the previous two years that saw $90 billion.
Despite being up roughly 30% from the start of the year, investors should brace for a challenging outlook from Apple.
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