stocks

Wedbush: Apple (AAPL) Earnings a 'Gold Medal' Performance

Apple blew past its fiscal third-quarter results in what Wedbush's Dan Ives calls a "drop the mic" quarter, though AAPL stock hardly budged.

Apple (AAPL, $146.77) was meant to be one of the highlights of a jam-packed earnings calendar this week. And despite what Wednesday's sluggish response in AAPL stock might suggest, Tuesday evening's report didn't disappoint.

In fact, Apple delivered what Wedbush analyst Dan Ives called a “gold medal” performance. The highlights:

  • Revenue of $81.4 billion (+36% year-over-year) topped expectations for $77 billion.
  • Profits of $1.30 per share (+100%) were well ahead of a $1.05 per share estimate.
  • Gross margins of 43.3% topped Wall Street’s 41.7% estimate.
  • iPhone sales reached $39.6 billion to top estimates by roughly $5.5 billion.
  • Services revenue of $17.5 billion easily topped expectations for $16.3 billion.

“We essentially view this quarter as the second half and the start of the back stretch of the 5G supercycle and a ‘drop the mic’ quarter for Apple,” says Ives. The analyst rates the stock at Outperform (equivalent of Buy) and has a $185.00 price target on the stock, implying 26% upside over the next 12 months. “The outlook was healthy and clearly cautioned with chip shortage comments, a prudent and smart approach heading into its next iPhone launch in September.”

"We believe this quarter is a great next step in driving this stock to a $3 trillion market cap over the next year as the Street further digests the numbers and pent-up demand story in Cupertino.”

AAPL stock was slightly lower in response, however, continuing a decent but hardly sterling year for shares. The stock is up 10% year-to-date, underperforming both the tech sector's 18% performance in 2021, as well as the S&P 500's 17% advance.

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Ives highlights Asia’s role in the earnings beat, with China revenue up 58% year-over-year. The country will remain a key ingredient to Apple’s success going forward, he adds, estimating that it will be responsible for roughly 20% of iPhone upgrades over the next year, including when the iPhone 13 launches. 

“Taking a step back, we believe based on our recent Asia supply chain checks that iPhone 13 demand will be similar/slightly stronger than iPhone 12 out of the gates which speaks to our thesis that this elongated "supercycle" will continue for Cupertino well into 2022,” he says.

Wall Street largely remains bullish on AAPL stock following the report. Among analysts surveyed by S&P Global Market Intelligence, 24 analysts call it a Strong Buy, another eight call it a Buy and seven say it's a Hold. Meanwhile, just one pro calls Apple a Sell, and two others deem it a Strong Sell.

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