Apple’s Services Revenue Likely to Highlight Q1 Results: Morgan Stanley

According to Morgan Stanley analyst Katy Huberty, Apple’s financial results for the quarter ended December 2021 are likely to beat market estimates, boosted significantly by revenue from the company’s services segment (via Seeking Alpha).

Apple set new quarterly revenue records across the board during the fiscal year 2021, reporting an all-time fourth-quarter high of $83.4 billion USD. The company currently stands to beat its own Q1 revenue record of $111.4 billion USD from last year.

Huberty, who has an overweight rating and a $200 USD per share price target on Apple’s stock, said on Thursday that she expects the Cupertino, California-based tech giant to report $19.2 billion USD in services revenue for Q1 2022, up 21% year-over-year and 3% ahead of Wall Street’s estimates.

Huberty noted that Apple’s services revenue was bolstered this past quarter by better-than-expected App Store performance. The analyst also said that the company’s revenue stability, upcoming product launches, and long-rumoured expansions into new markets like AR/VR products and electric cars “make [Apple] more defensive in a rising rate environment.”

For the quarter as a whole, Huberty expects Apple to report $118.2 billion USD in revenue, beating Wall Street projections by 3%. Huberty said stronger iPhone production and fewer manufacturing hiccups in the quarter contributed to the growth, in addition to a strong showing in China.

Despite the ongoing chip shortage and some of the “bleakest” supply chain issues Apple has seen in years, the iPhone maker led global smartphone shipments between October and December 2021 thanks to extraordinary demand for the iPhone 13.

“When we take these data points together, we believe iPhone likely outperformed consensus estimates,” said Huberty, who predicts 83 million iPhone shipments during Apple’s fiscal 2022 first quarter. These figures would represent a 4% increase in shipments year-over-year and are “largely in-line” with projections from the Bank of America’s greater China technology hardware team.

After falling to a quarterly low point of $138.27 USD on October 4, Apple shares turned the tide and hit a new all-time high of $182.94 USD, just after it has reached a $3 trillion valuation for the first time earlier this month. At the time of writing, Apple stock is sitting at $167.94 USD per share.

Analysts expect Apple’s earnings per share for Q4 2022 to be $1.88 USD when the multitrillion-dollar company reports results on Thursday, January 27.