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According to investment bank JP Morgan, Apple will only see limited risks in the short or medium term due to the current macroeconomic conditions.
In a note to investors seen by AppleInsiderJP Morgan analyst Samik Chatterjee answers some frequently asked questions about Apple’s upcoming quarterly results in June. In addition, he also makes some predictions about the short- and medium-term situations of Apple.
Chatterjee still believes Apple is a safe haven for investors given the resilience of earnings estimates against a backdrop of macroeconomic deterioration. While there is a chance of a downside to Apple’s current valuation, he expects the downside to be fairly limited.
The analyst sees only limited risks for Apple’s fourth quarter 2022 and first quarter 2023. As a result, Chatterjee modestly raises its Apple estimates for Q3 2022 and Q4 2022.
Chatterjee’s higher estimates for 2022 are due to better momentum and market share in Apple’s hardware product portfolio, which will offset mounting headwinds from an unfavorable exchange rate.
“The modest changes in our forecasts are primarily driven by an increase in iPhone revenue,” Chatterjee wrote. “Recent acceleration in China momentum, especially for iPhone demand [leads] us to increase our full year FY22 volume forecast from 247 [million] up to 252 [million] units, despite the headwinds of Russia’s exit.”
In the medium term, the analyst believes there are greater risks to Apple’s iPhone 14 cycle because of the economic situation.
The aforementioned exchange rate problem could make the iPhone 14 price more expensive in international markets. As more expensive models become more unaffordable, Chatterjee believes there will be a mix of consumers.
Going forward, however, the analyst still believes Apple will be able to offset these risks in the medium term due to relatively weak competition from 5G device rivals, as well as iPad and mac market share increases.
The analyst maintains its 12-month price target for Apple stock of $200. The estimate is based on a price-to-earnings ratio (P/E) of 30x on its 2023 earnings estimate of $6.64.