Apple Inc. Anticipates Stable Fiscal Third Quarter Amid Supply Chain Challenges
Apple Inc. (NASDAQ: AAPL, XETRA: APC) is poised to report a fiscal third-quarter performance that aligns closely with analysts’ projections.
UBS has predicted a consistent trajectory for iPhone sales alongside Services revenue, even as it navigates persistent supply chain adversities.
UBS anticipates total revenue to reach approximately $107.8 billion, marginally below the Visible Alpha consensus of $108.1 billion.
iPhone revenue is projected at $53.3 billion, aligning with market expectations and signifying an estimated 20% year-over-year increase.
Recent channel checks indicate that Apple’s iPhone division has improved its market share during the quarter, bolstered by favorable pricing strategies and continuous demand for high-end smartphones.
UBS points out that Apple was the sole major smartphone manufacturer that refrained from price hikes during the June quarter, which facilitated its market share gains across pivotal regions including the United States, Europe, and China.
Furthermore, the firm noted that escalating component costs—particularly in memory—have positively influenced demand for premium devices, as consumers continue to gravitate toward higher-priced options rather than mid-range or budget models.
While UBS expects the forthcoming iPhone 17 lineup to contribute to market share increases, analysts advise caution, suggesting that the market may already be factoring in stronger-than-expected outcomes.
Current trading of Apple shares reflects a valuation of approximately 35 times forward consensus earnings, a factor UBS identifies as potentially constraining the risk-reward dynamic.
The forecast for Services revenue suggests an anticipated growth of around 13% on a foreign exchange-neutral basis, albeit with limited upside due to challenges affecting App Store income and Google search-related payments.
UBS projects diluted earnings per share at $1.84, slightly lower than the Visible Alpha consensus of $1.87. The firm indicated that earnings could see a modest uplift if operating expenses fall within Apple’s lower guidance range, which UBS estimates to be approximately $18.8 billion.
Gross margin for the June quarter is expected to hover around 48.0%, consistent with consensus and in accordance with Apple’s guided range of 47.5% to 48.5%.
UBS anticipates that increased memory costs will exert pressure on iPhone margins, albeit somewhat mitigated by the influx of lower-cost inventory impacting the cost of goods sold.
iPhone gross margins are estimated at around 39.5%, representing a decline of roughly 250 basis points from the previous quarter.
Looking forward to the September quarter, UBS predicts a consolidated gross margin of 47.5%, foreseeing that benefits from lower-cost component inventories may dwindle.
Potentially, the forthcoming launch of a foldable iPhone could offer some margin support, as UBS suggests this device could yield higher margins compared to existing premium offerings. Nevertheless, the firm cautions that without price increases, iPhone margins may encounter further strain.
UBS has retained its $296 price target for Apple, attributing it to a valuation of about 30 times its calendar 2027 earnings estimate of $9.86 per share. As of Friday, Apple shares were trading at $335, reflecting a 23% increase year-to-date.
Source link: Proactiveinvestors.com.
