There is a long-term path to AAPL at $500 despite a rough fiscal quarter

Loop Ventures analyst Gene Munster expects Apple’s June quarter to have below-par financial results, but says the earnings report will show there are key signs that ‘Apple remains on track to grow and even find positive elements of the coronavirus.

In a research note seen by Appleiphonestop, analyst Gene Munster says he expects Apple’s earnings to be down 10% from the June quarter of last year. Noting that Apple has not released any guidance, he says the results will spark investor debate, but that the underlying numbers are positive for Apple now – and especially going forward.

“[The] The 2020 slowdown could prove to be positive for the company, given Apple’s financial strength, anchored by what we expect is $ 180 billion in cash, ”he says,“ that will be used. to retain and acquire talents and technologies that will advance their program. ”

This agenda includes the continuation of its planned products and Munster contends that the “powerful trends” pursued by Apple will continue into the next decade. Specifically, he sees that “5G drives both an upgrade cycle and reaping benefits from what technology allows”.

He also expects “software services to continue to enter new industries” and Apple TV + “original content and streaming entertainment to increase the share of media consumption”. Along with this, Apple’s current health and wearable devices will become more and more important and Apple Pay will continue to grow.

Beyond the products and services that Apple currently sells, Munster also anticipates many of the expected futures. “Augmented reality [is] emerging as the next major computing platform with Apple glasses available around 2022, ”he says.[And] even if we do not know what form it will take, we expect Apple to make an entry into autonomy [such as cars]. ”

“In summary, we are optimistic about Apple’s prospects over the next five years and believe the company can generate $ 22.00 in GAAP profits in 2023,” he said.

As for current profits, he believes Apple’s overall results will drop, however, with revenue likely to be $ 49.5 billion. That’s 8% lower than last year, and also below most analysts’ forecast of $ 51.9 billion.

“[However we] expects the June results to inspire confidence that the company will reverse its growth curve next year, “he wrote.” Investor confidence will be based on Apple’s strong cash position and feedback on upcoming products that tap into undeniable long-term growth moves, digital health, work and home learning, services and autonomy). ”

Wearable devices like Apple are expected to be on the rise

Wearable devices like Apple are expected to be on the rise

The figure of $ 49.5 billion includes an estimate of iPhone revenue down 20% year on year to $ 20.8 billion, but services up 18% to $ 13.5 billion. Wearable devices are also expected to be on the rise, with Munster forecasting a 15% increase this quarter. “Apple does not report this metric,” he notes, “but frequently comments on the segment’s sales trajectory”.

He also notes that he expects Apple to “hint that its annual fall iPhone release is largely on track.”

The impact of Apple’s coronavirus

Describing this June quarter as “one (hopefully) one-time event,” Munster says the usual methods of measuring success are less relevant than usual. “The quarter is an opportunity to research relevant informationon about Apple’s current strength, its future prospects and its true intrinsic value.”

Based on this, Munster describes Apple’s track record as its most important metric. “At the end of the March quarter, Apple had net cash of $ 83 billion and approximately $ 193 billion in total cash,” he notes. While expecting those numbers to drop, he says it’s a key indicator of Apple’s ability to “weather the storm.”

Of all U.S. tech companies, Munster says “Apple was at the greatest risk” of being hit by the coronavirus when its March results. “Given these headwinds,” he says, “to report 1% revenue growth was a victory.”

Munster argues that investors and other analysts have missed “the importance of the actions the company takes to run the business to generate long-term income and profitability.” He also compared Apple to Amazon, which he said shares a similar market capitalization, but mainly because investors have so far “dampened” optimism for Apple.

“We expect Amazon to continue to be successful,” he said. “At the same time, we expect Apple to release results that will surprise investors on the upside as the company emerges from the pandemic even better positioned to return to its long-term growth curve.”

Apple is due to release its third quarter 2020 results on July 30. Appleiphonestop will be providing full coverage of the earnings call starting at 2:00 p.m. PT (5:00 p.m. ET).

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