Apple, Inc. AAPL reported its third quarter financial year results late Thursday that exceeded tacit expectations.
Apple “defying gravity and power through early stages of macro slowdown,” Loup Fund’s Gene Munster Commenting on the quarterly results, he said.
iPhone now a necessity: CEO Tim Cook Analyst-turned-TechVicture Capitalist said there is no evidence of a macroeconomic impact on iPhone sales during the quarter other than forex on the earnings call.
The 3% iPhone revenue growth is more impressive than it sounds, considering it came up against a tough 50% comp, he said.
“The iPhone is stronger than an acre of garlic,” Munster said.
Noting that the iPhone has now turned from a luxury product to an essential product, he said, what is noteworthy is that iPhone buyers, though feeling the inflationary pressures, are deciding to spend on the iPhone.
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Guidance not a concern: Munster said Apple’s guidance released on the earnings call indicates an uptick in revenue growth in the September quarter, compared with 600 basis points of negative foreign exchange impact from a year ago.
He said revenue growth in the September quarter could be at least 3%, factoring in the 6% foreign exchange headwind.
Excluding foreign exchange impact, revenue growth will be at least 9%, essentially in line with 8% growth the Street is forecasting, he said.
Apple also noted that the negative impact from supply chain disruptions would be less than $3 billion for the third quarter, Munster said.
The Loop executive said he expects a reduction in Street estimates for the fourth quarter. He said gross margin guidance of 41.5%-42.5%, though softer than consensus estimates, is still impressive.
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Shortcoming: Munster said Services and Mach revenue estimates are slightly lower. His view was that service revenue was essentially in line and that the Mach headwind would be temporary.
Estimates for wearables, home and accessories were down 10%, with Apple attributing a reduction in forex, supply crunch and loss of business in Russia.
“I believe that softness was a fourth contributor. The Watch and AirPods are not essential, so consumers are holding off,” Munster said.
A launch-heavy year ahead: Munster said Apple expects to ship 11 new products in fiscal year 2023, up from the usual seven to nine.
“Negotiations at Apple will soon shift to FY23, and investors will likely conclude that Apple is ahead of a favorable new product year,” he said.
Beyond 2023, there are other potential growth areas, including potentially some in health, AR/VR headsets and autos.
Apple shares rose 2.32% to $161 in premarket trading on Friday, according to data from Benzinga Pro.
Photo courtesy of Apple.