Some Wall Street firms are sounding the alarm on Apple heading into the iPhone maker’s earnings after the bell Thursday. Some analysts are bracing for soft iPhone numbers and a potential guide down in March’s forecast. “We expect Mar-Q guide will miss Street estimates due to softening hardware demand, which would continue a multi-quarter trend for AAPL,” said Barclays analyst Tim Long, who has an underweight rating on the stock. AAPL YTD mountain Apple shares year to date Apple’s earnings report comes as the technology giant lags its mega-cap peers and the overall market. Apple shares are flat on the year, while the S & P 500 is up 2.5% in that time. The other “Magnificent 7” stocks — with the exception of Tesla — have rallied between 4.7% and 23%. Contributing to the expectations for soft iPhone numbers are expectations for ongoing weakness in China, with the latest checks suggesting double-digit declines in iPhone 15 sales in the region, Long wrote. The firm is modeling 52 million iPhone sales for the March quarter, below a consensus estimate of 54 million to 55 million and thinks the iPhone 15 is “not a good cycle on demand weakness and elongation of replacement cycles.” “IP15 has been lackluster and we believe IP16 should be the same,” he said. “Other hardware categories should remain weak, and we don’t see Services growing more than 10%. We expect reversion after a year when most quarters were missed and the stock outperformed.” UBS analyst David Vogt said Apple may top revenue estimates for the December quarter due to a 2 million to 3 million inventory build of iPhone units in China. The inventory build above sell-through could suggest slight EPS upside, but it shifts risks to the March period. “While better iPhone financial metrics in Dec is a modest relief, given upside is driven by a ‘channel build’ 15%- 20% above demand in China creates risk for the Mar qtr and does not change our full yr forecast of 230M units,” he said, maintaining a neutral rating on the stock. Baird’s William Power also expects a quarterly beat but “mild” risks for the fiscal second quarter, with the firm forecasting a 23% decline in iPhone revenue for that period year over year. Despite these fears, the firm remains bullish on the stock over the long run, sticking with its buy rating. Baird raised its price target to $200 from $186 per share Monday. However, the new target implies upside of just 4%. “We acknowledge some risk to March-quarter numbers coming off the holidays, though that noise ratchets up most years, and yes, valuation is still on the higher end,” he said. “Those factors contribute to us being more aggressive on any weakness. But our long-term framework, anchored by services growth, new product opportunities … and strong cash flow, is unchanged.”
