Confidence 'has never been higher' : Here's what 4 Wall Street banks had to say about Apple's fiscal 4th-quarter earnings

Stephen Lam/Reuters
  • While investors balked at Apple’s worse-than-expected quarterly iPhone sales, analysts are looking past the September quarter and largely optimistic toward the company’s future.
  • The tech giant reported revenue and earnings on Thursday afternoon that beat estimates, but its stock tumbled as phone sales disappointed shareholders.
  • Analysts at major banks praised growth in Apple’s computer and services segments and advised clients to buy shares while they’re at relative lows.
  • Here’s what four major Wall Street banks had to say about Apple’s fiscal fourth-quarter report.
  • Watch Apple trade live here.

Apple’s fiscal fourth-quarter report left investors wanting. Wall Street isn’t so concerned.

The tech giant’s revenue and profit for the September quarter beat expectations, but all-important iPhone sales missed analyst hopes. The shortfall and lack of forward guidance dragged shares to their lowest in a month and saw as much as $US111 billion erased from Apple’s market cap.

Still, analysts are mostly optimistic about iPhone performance moving forward. Apple’s new iPhone lineup debuted roughly one month later than usual, pushing revenue from the phones’ release into the December quarter. With strength in services and Mac sales offsetting some of the iPhone’s recent slowdown, Wall Street largely expects reinvigorated phone orders to lift Apple to new heights.

Here’s what four major Wall Street banks think of the report and Apple’s future trajectory..

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Bank of America: ‘Likely to temper near-term enthusiasm’

The previous quarter’s mild beat and vague optimism for current-quarter performance will “likely temper some near-term enthusiasm” after Apple surged to a lofty valuation, analysts led by Wamsi Mohan wrote in a note. The new phones’ later launch should bolster December-quarter sales and carry strong momentum into the following three-month period, they added. Still, lingering coronavirus uncertainties place hopeful forecasts at risk.

“Management noted double-digit growth in all areas outside of iPhones with the expectation that the demand environment does not change materially due to COVID-19. Although management remains bullish on the iPhone cycle, our estimates for the cycle remain relatively unchanged,” the team said.

Bank of America lowered its price target to $US135 from $US140 following the disappointing iPhone sales reading, still implying a 17% rally from Thursday’s close. Upcoming quarters will see margins improve, but gains will mostly offset the September quarter, the bank said, adding its full-year estimates will stay the same.

Bank of America holds a “neutral” rating on the stock.

Wedbush: ‘On the cusp of its largest iPhone cycle’ since 2014

Though iPhone weakness drove Friday’s sell-off, investors can rest assured that the new lineup will drive strong sales through the current quarter, Wedbush analyst Dan Ives said. Pre-order activity is tracking at double the rate seen during last year’s iPhone release, suggesting the 5G-capable lineup is “off to a robust start.”

Couple the strong start with the roughly 350 million iPhone users estimated to be due for an upgrade, and Apple seems to be “on the cusp of its largest iPhone cycle since iPhone 6 in 2014,” Ives said. Investors disappointed by the Thursday report should scoop up shares on any weakness, he added.

Wedbush holds an “outperform” rating for Apple shares with a price target of $US150.

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Morgan Stanley: Confidence ‘has never been higher’

Analyst Katy Huberty reiterated the call to buy, saying in a Friday note that she would be a buyer “on any weakness post-earnings.” Apple is entering the new fiscal year with its strongest ever lineup of products and services, with tailwinds from 5G, work-from-home demand, and growing adoption of digital services, she highlighted.

Confidence in Apple’s ability to “retain existing users, attract new users, and accelerate growth and profitability has never been higher,” Huberty added.

Morgan Stanley holds an “overweight” rating on Apple shares with a price target of $US136.

Canaccord Genuity: ‘Well-positioned to benefit from the 5G upgrade cycle’

Instead of focusing on weaker-than-expected iPhone sales, investors should look at the bigger picture, analyst T. Michael Walkley said.

“The company is continuing to demonstrate the strength of its product ecosystem amidst the pandemic with strong double-digit growth for Macs, iPads, and services,” he added.

The disappointing fourth-quarter figures will ramp into strong phone sales in the new fiscal year, according to the firm. Apple is “well-positioned to benefit from the 5G upgrade cycle” as communications infrastructure continues to be built out, Walkley said. iPhone sales will accelerate the most in the fiscal second quarter, he added, as the case for 5G-capable phones strengthens.

Canaccord Genuity holds a “buy” rating on Apple with a price target of $US145.

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