Bernstein SocGen Group Reiterates Outperform Rating on Apple (AAPL)

Bernstein SocGen Group analyst Mark C. Newman reiterated an Outperform rating and $370.00 price target on Apple (NASDAQ: AAPL)

The analyst comments: “Apple reported revenue of $114.5bn (+12% YoY), 1.6% above Bernstein and 0.9% above consensus, with diluted EPS of $2.10, 6% above Bernstein and 5% above consensus. Revenue growth exceeded the company's prior 9%-11% guidance, while iPhone revenue grew 17%, modestly above its mid-teens outlook, and Services grew 10% despite an approximately 2.5 ppt incremental FX headwind, implying roughly 12.5% growth excluding FX, broadly consistent with F3Q's 12% growth. Gross margin of 47.9% was at high end of the 47%-48% guided range and 36 bps above both Bernstein and consensus, while operating margin of 31.1% exceeded Bernstein by 68 bps and consensus by 44 bps.

Revenue guidance was strong but gross margin even worse than our below-consensus estimate, with memory inflation offsetting premium mix benefits. Apple guided December-quarter revenue growth of 7–10% YoY, reflecting ongoing supply constraints, with Services growth of 8–9% YoY. More importantly, gross margin guidance of 45–46% was worse than our estimate of 46.2% (vs. cons at 46.7%), which incorporated a more favorable iPhone mix, offset by accelerating memory cost inflation. For additional thoughts on Dec Qtr Apple gross margin, please see here. Furthermore, if we exclude the benefit of premium mix and assume that iPhone 18 base was available, we estimate that company Dec gross margin could be ~30 bps worse than guided. Management explicitly cited higher memory costs as the primary gross margin headwind, with memory prices continuing to rise beyond the Dec Qtr and the benefit from lower-cost inventory diminishing over time. Therefore, we expect gross margin pressure to persist in the near term. Operating expenses are expected at $20.4–20.8bn, with a tax rate of ~17%.”

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $338.32 yesterday.

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