JP Morgan suggests AAPL investors take advantage of any -earnings recalibration

Citing a trio of trends that should fuel Apple through the ongoing COVID crisis, the investment bank JP Morgan announced Monday that investors are recalibrating the share price of the company at any time to gradually supplement their existing positions.

JP Morgan remains optimistic about Apple’s long-term prospects despite the possibility of weak results in Q2 2020.

In a note to investors seen by Appleiphonestop, JP Morgan analyst Amik Chatterjee said that the investment bank maintained “solid long-term prospects” on Apple despite the possibility of weak results in the second quarter and the lack guidelines for the third trimester. Apple will release its second quarter 2020 results on Thursday, April 30.

Chatterjee thinks it is very likely that Apple will bypass its usual practice of issuing hints for the June quarter. Combined with the fact that current expectations of buying 25 to 28 million iPhones sold during this quarter could be reduced, there is a risk of equity underperformance.

Chatterjee says there is a precedent among unseen tech companies for the June quarter, and that Apple’s move in this area should not surprise investors. Beyond that, the analyst remains optimistic about Apple’s long-term prospects and the company’s ability to recover from the current coronavirus pandemic. In fact, JP Morgan recommends that investors use the potential fallout from weak Q2 2020 results to make incremental additions.

Credit: JP Morgan
Credit: JP Morgan

Despite growing concerns about COVID-19, Chatterjee said that Apple is currently outperforming the S&P 500 from year to year and that the company is well positioned for a strong recovery in the fall and into 2021.

These prospects are largely motivated by three factors. On the one hand, Apple maintains high quality profits, cash flow and balance sheet, and the transformation of the company’s services is always an advantage. According to rumors, an iPhone 5G should lead to a strong volume cycle until 2021.

Chatterjee said Apple is “relatively better positioned” to outperform in the long term with the recovery in consumer discretionary spending. As investors continue to question the possibility of a weak recovery in consumer spending, JP Morgan stressed “a much larger portfolio in terms of price” and Apple’s ability to take advantage of the supply chain to bring prices down.

Credit: JP Morgan
Credit: JP Morgan

Other factors, such as growth in the installed user base, leadership in the technology sector, and the discretionary nature of capital deployment, “together lead us to expect double-digit profit growth and a modest reassessment of stocks, “wrote Chatterjee.

When Apple calls results Thursday, JP Morgan forecasts total revenue of $ 52.1 billion, just below consensus expectations of $ 54.3 billion, and gross profit 38.4%. This includes estimated revenue of $ 23.9 billion for the iPhone, $ 4.1 billion for the iPad, $ 4.6 billion for the Mac, and $ 13.6 billion in services. for services and $ 5.8 billion for portable devices, home and accessories.

The investment bank also estimates the total turnover of Apple at 36.2 billion dollars for the June quarter, against a consensus of 51.5 billion dollars.

JP Morgan maintains its price target of $ 335 in December 2020, which is based on an estimate of earnings per share for the year 2021 of $ 16.75 and a price / mixed earnings ratio of 20.0x. This ratio is based on multiples of 16x for iPhone, 11x for Mac and iPad, 25x for Services, 20x for Apple and AirPods and 11x for Other Products.

Apple shares are currently trading at $ 283.14, up 0.06% on the NASDAQ at the time of publication.

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