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Is Apple poised to disappoint?

(FinancialPress) — Nov. 2 marks the next quarterly earnings report day for Apple (AAPL) – and the popular stock is polarizing among analysts, even with shares trading very close to its 52-week high at the moment.

On the darker end of the opinion spectrum, we can find Mizuho‘s Parthiv Varadarajan‘s and Abhey Lamba‘s. While they expect the Silicon Valley giant’s earnings to come in-line with consensus expectations, they also warn that the guidance could be underwhelming – and are not seeing any signs that lean them towards changing their Neutral rating:

“Our thesis remains unchanged – we acknowledge the upgrade cycle opportunity, but we continue to see near-term volatility to shipment estimates as the X ramp is delayed, thereby contributing to supply shortages. In addition, we believe the phenomenon with respect to the iPhone 8 (due to the incremental nature of the upgrades) and iPhone X (customers potentially delaying purchases of the pricey device in anticipation of OLED features in mainstream SKUs next year) could weigh on shipment performance later in FY18.

We expect demand to outstrip supply for iPhone X over the next two quarters but demand could potentially slow down starting in the June 2018 quarter due to anticipation of new devices later in the year. We have raised our revenue and EPS numbers for FY18 but our updated forecast remains below consensus, which we think has a very limited upside, if any.

With the stock at around 15x consensus FY18 EPS expectations, we think risk-reward is balanced and see the multiple reflective of the enthusiasm around the current cycle priced into the stock. With more limited upside to street consensus in the near-term, we maintain our Neutral rating though we adjust our PT to $160 from $150 on the back of estimate changes for FY18 (to account for higher ASPs and better mix).”

Shares of Apple are currently trading at $159.76, and the Technology Select Sector SPDR ETF (XLK) stands at $60.87.

With this morning‘s news of the iPhone 8‘s production being cut in half due to “supply issues“, and the subsequent drop of 1.5% in stock value, their rating perspective may be well on-point.


On the flip side, similar warnings rose before the previous quarter‘s report – when the stock was downgraded from “Buy“ to “Neutral“. In the end, net income was up nearly 12%, revenue up over 7% and net profit margin increased to +4.29%.

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