Source: Finance Association
① Counterpoint estimates that Apple's iPhone sales in China fell 19% in the first quarter (January to March of this year), the worst quarterly performance since 2020; ② Morgan Stanley said its survey and latest estimates showed that demand for Apple iPhones was generally stable in the second fiscal quarter, and strong growth in emerging markets (other than China) partially offset the decline in the Chinese market.
Despite competition from local mobile phone manufacturers such as Huawei,$Apple (AAPL.US)$Sales in China declined in the first quarter, but Morgan Stanley insisted that Apple's strong sales in other regional markets were sufficient to support its performance in the second fiscal quarter (up to the end of March) outperforming market expectations.
Apple is due to release its second-fiscal quarter results on May 2. On Monday EST, Morgan Stanley said that due to stable product demand and excellent service performance, Apple's results for the second fiscal quarter (up to the end of March) may have been better than expected, but the results for the third fiscal quarter (up to the end of June) may be lower than market expectations.
Was Apple growing strongly in the second fiscal quarter?
According to market research firm Counterpoint, Apple's iPhone sales in China fell 19% in the first quarter (January to March of this year), the worst quarterly performance since 2020. Apple dropped to third place in the highly competitive Chinese market, roughly on par with Huawei. The overall market grew by about 1.5%, with local brands such as Honor and Xiaomi leading the way in growth.
Despite poor sales in China, Morgan Stanley still believes that Apple's growth in other markets is enough to make up for this loss.
Morgan Stanley said its survey and latest estimates showed that iPhone demand was generally stable in the second fiscal quarter, with strong growth in emerging markets (excluding China) partially offsetting the decline in the Chinese market. The company raised Apple's second-fiscal quarter iPhone shipment forecast from 49 million units to slightly more than 50 million units.
Morgan Stanley said, “The iPad experienced a similar situation this quarter. The latest supply chain shipment forecast shows that iPad shipments are about 5% higher than our previous forecast.” Morgan Stanley had previously anticipated shipments of 10.5 million iPads.
Morgan Stanley also expects Apple Mac shipments to grow year over year, higher than expected, while service revenue is likely to increase by nearly 13%.
Morgan Stanley wrote in the report that due to better-than-expected shipments of Apple products and the App Store's outstanding performance, Morgan Stanley raised Apple's earnings forecast per share from $1.48 to $1.51 billion, and the revenue forecast was raised from US$89.95 billion to US$91 billion. In contrast, Wall Street's earnings per share and revenue expectations for Apple were $1.5 and $90.3 billion, respectively.
Are the results for the third fiscal quarter still not optimistic?
Although optimistic about Apple's second-fiscal quarter performance, Morgan Stanley is not optimistic about Apple's performance in the third fiscal quarter (up to the end of June).
Morgan Stanley expects Apple's earnings per share to remain unchanged at $1.22 for the third fiscal quarter, but lowered its revenue forecast from US$80.85 billion to US$80 billion, which is lower than Wall Street's forecast of US$1.31 and US$83.33 billion.
Morgan Stanley also expects Apple's iPhone revenue for the quarter to be 35.63 billion US dollars, lower than Wall Street's average forecast of 37.82 billion US dollars; Damo expects to ship 39 million iPhones in the third quarter, which is also 15% lower than Wall Street.
Morgan Stanley said, “What we want to emphasize is that there may be some room for improvement in our iPhone shipment volume forecast, because the recent production momentum means that compared with our forecast, iPhone shipments may have room to rise by 2 million units, but given the general weakness in global iPhone demand, we are currently keeping the iPhone shipment forecast unchanged.”
The company lowered its target price for Apple shares from $220 to $210, while maintaining an increase rating.
“We expect our results for the second fiscal quarter to be better than expected, and our results for the third fiscal quarter to decline. But given that the stock is currently at $165, we think this expectation has largely been digested,” the report said.
Before WDC or the best time to enter
Looking ahead, Morgan Stanley predicts that the Apple Global Developers Conference in June this year will be the focus of market attention, and the top priority may be the new artificial intelligence software features Apple may launch.
Morgan Stanley believes that for investors, it may be the best time for investors to enter before this “largest global developer conference in history” is held.
However, Morgan Stanley also wrote: “Apple's stock price is likely to experience a mitigating rebound/squeeze higher due to 'better-than-expected' performance reports/guidelines. This has created a tricky situation: we don't think there will necessarily be a right time for investors to enter before this (Global Developers Conference).”
The company said that before Apple's June Global Developers Conference, if Apple weakens after the results are announced, Morgan Stanley will take the opportunity to buy it.
editor/tolk