- Apple’s third-quarter earnings report easily exceeded analyst estimates on strength in all of its businesses.
- Apple reported revenue of $US81.4 ($AU111) billion, beating analyst estimates by a massive $US7.9 ($AU11) billion.
- Here’s how 3 Wall Street analysts reacted to Apple’s blockbuster third-quarter earnings report.
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Apple delivered another blockbuster earnings report on Tuesday, with its fiscal third quarter revenue and income easily beating analyst estimates.
The iPhone maker reported revenue of $US81.4 ($AU111) billion and earnings per share of $US1.30 ($AU2), beating analyst estimates by $US7.9 ($AU11) billion and $US0.29 ($AU0), respectively.
All of Apple’s businesses were particularly strong and all beat analyst estimates, including the iPhone, Mac, iPad, Wearables and Accessories, and the all-important Services, which has helped fuel Apple’s price-to-earnings multiple of about 30x.
Despite the positives, Apple traded lower following the results, as some analysts worry that the company will be unable to exceed the strong growth seen this year. Apple gave a wide range in guidance, saying sales will grow double digits, but not as much as the 36% growth it saw this quarter.
As investors navigate Apple’s results, here’s how three Wall Street analysts reacted to the third quarter earnings report.
Wedbush: “Apple delivers another ‘drop the mic’ quarter.”
Apple’s third quarter earnings results emphasized the ongoing iPhone and 5G supercycle, Wedbush analyst Daniel Ives said.
“Overall we would characterize this as a ‘gold medal’ performance by Apple during the quarter especially when considering the chip shortage overhang,” Ives said. Ives believes the strength in Apple’s Services business will continue as the company’s iPhone installed base continues to grow.
Ives said Apple will likely be worth $US3 ($AU4) trillion within the next six to nine months, and that Apple’s Services business is worth $US1.5 ($AU2) trillion alone. Apple’s market value currently stands near $US2.5 ($AU3) trillion, implying potential upside of 20% from current levels.
Ives applauded Apple’s strong gross margin performance and believe China will continue to perform well, especially with the upcoming launch of the iPhone 13. Ives reiterated his Outperform rating and $US1.5 ($AU2) price target.
JPMorgan: “Upside to long-term drivers even as supply challenges limit optimism.”
JPMorgan applauded Apple’s revenue, earnings, and gross margin beats relative to analyst estimates, and pointed to the company’s fast-growing Services business as validation for its massive iPhone installed base of more than 1 billion users.
Challenges in the supply chain could limit optimism in Apple in the near-term, but longer-term they pose little threat to the company, according to JPMorgan.
“While the uncertainty in supply limits near-term visibility for the company and investors alike, we see the long-term drivers unaffected by the temporal headwinds, which includes stronger than expected iPhone demand/market share led by a strong upgrade cycle, which sets up for material revisions to 2022 iPhone volume expectations (where expectations remain low),” JPMorgan said.
The bank reiterated it Overweight rating and $US1.5 ($AU2) price target, and said Apple is a top pick for investors.
Goldman Sachs: “Backlog dynamics position company well through end of year.”
Apple’s ongoing navigation of a scarce supply chain amid the ongoing recovery from the COVID-19 pandemic creates a position of strength for the company, with backlog dynamics positioning the company well through the end of the year, Goldman Sachs said.
The bank views Apple’s revenue growth guidance of less than 36% in Q4 as “conservative though heavily dependent on supply dynamics.” The bank expects next quarter’s revenue growth to come in at 38%.
“We find no fault in these numbers and continue to see Apple’s execution here as exceptional given the size and scope of the company. It continues to be tough to believe these trends are sustainable but, for now, our approach is to take the data as it comes and the data this quarter was very positive,” Goldman Sachs said.
The bank reiterated its Neutral rating and raised its price target for Apple to $US140 ($AU190).