Wall Street is closely watching Apple (AAPL) ahead of its fiscal third-quarter earnings this evening, as investors will be looking to see if the tech giant can show strong quarterly results.
That said, the biggest factor behind Apple’s quarterly results would be fiscal fourth-quarter guidance, as historically the 4th quarter has been seasonally strong.
Before getting more confident on the story, Deutsche Bank analyst Ross Seymore would like see if there will be a lull in iPhone sales prior to the release of a 5G iPhone in 2020. Ahead of the print, Seymore reiterates a Hold rating on Apple stock with a $205 price target, which implies a slight downside potential from current levels. (To watch Seymore’s price target, click here)
As always, we like to give credit where credit is due. According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Seymore has a yearly average return of 27.4% and a 83% success rate. Seymore is ranked #23 out of 5,257 analysts.
Although Apple’s Services has been singled out by many on the Street as key to the company’s continued success, Apple’s iPhones still drive its operating results. Apple recently shifted its iPhone cycle from a 2-year major upgrade cycle to a 3-year major upgrade cycle. This means that the 2020 iPhone will likely be the first iPhone to have 5G. If investors focus on what is expected to be a continued weakness in iPhone sales through September, December, and March, then Apple stock will suffer. However, if the Street looks past this weakness with an eye on the 2020 iPhone, then strong Service growth could help support Apple stock, according to Seymore.
For the past quarter, Seymore predicts revenue of $52.6 billion, which would be a decrease of 9% q/q and 1% y/y. Furthermore, the analyst forecasts EPS of $2.04 versus consensus estimates of $2.09. Looking ahead, Seymore expects 4Q revenues of $59.2 billion, which is a 13% increase q/q and a 6% decrease y/y. For the full year of 2019, Seymore forecasts revenue of $254 billion, which would represent a 4% decrease y/y.
Overall, Seymore thinks that the potential reward of owning Apple stock is “fairly balanced with the company’s risk profile.” Although Wall Street is a bit more bullish on Apple stock compared to Seymore, it isn’t by much. TipRanks analysis of 35 analyst ratings on Apple stock shows 20 analysts Buying, 13 waiting on the sidelines, and 2 Selling. The average price target on AAPL is $215.78, which only represents about 4% upside from the current share price. (See AAPL’s price targets and analyst ratings on TipRanks)