By Senad Karaahmetovic
Goldman Sachs analyst Rod Hall has reflected on Apple (NASDAQ:AAPL) ahead of the company’s FQ3 earnings results that are due on July 28.
Hall says Apple likely experienced “solid demand” in FQ3, fueled by a strong rebound in China. China CAICT data reads positively for Apple, Hall added in a client note.
“Based on CAICT data for handset shipments in Mainland China, we estimate that iPhone shipments rebounded to +13% Y/Y in the month of May from a -39% decline in April. Aggregating April & May, we also note that the Y/Y decline in iPhone shipments (-9% Y/Y) vs. overall handset market shipments in China (-23% Y/Y) highlights that high end demand remains stronger than overall handset demand. In addition, our checks suggest an even stronger sales momentum in June as lockdowns were further reduced likely driving realization of pent up demand.”
However, the analyst sees a risk for Apple in the context of a stronger-than-expected U.S. dollar.
“A worsening FX environment probably means currency headwinds in FQ3 were more severe than the ~3pp Apple indicated in its FQ2 earnings call. For FQ4 we calculate that FX is likely to be an even worse headwind of ~6pp to revenue growth with potential negative impacts to margins as well,” Hall added.
Moreover, the FQ4 setup is further complicated by early signals that Apple may witness slowing demand in Europe.
Overall, Hall is below consensus for FQ3 as he projects Apple will report EPS of $1.11 on sales of $80.2 billion, which tracks below consensus of EPS of $1.15 on revenue of $82.4 billion.