Apple Q1 Earnings Preview: Still Poised To Ripen

“We expect solid FQ1 results, and while we acknowledge moderate risk to the March and June quarters, we view shares as attractive in advance of the iPhone 8 cycle,” Baird’s William Power said in a note.

The analyst maintained an Outperform rating on Apple Inc. (NASDAQ: AAPL), with a price target of $133.

FQ1 Expectations

For FQ1, the analyst expects Apple to report robust results, while acknowledging the potential for moderate risk to the March and June quarters, as consumers look forward to the much awaited launch of the iPhone 8.

Power expects the company to report 75.2 million iPhone shipments for the December quarter, with 51.4 million for the March quarter.

“We expect any potential stock weakness to be absorbed as iPhone 8 hype continues to build,” the analyst stated, while adding that iPhone units and revenue was expected to grow 7 percent year on year in FQ1 2018.

Tax Holiday

Along with an improved growth profile, Power expects the company to be a “prime beneficiary” of lower tax rates and a “potential tax repatriation holiday."

Apple is expected to use the potential tax repatriation holiday for a larger share buyback. The company has so far completed buybacks worth $133 billion, of its $175 billion authorization through March 2018.

A lower tax rate could add about $0.50 to the company’s full year EPS, according to Power.

In addition, the analyst noted that “Apple's recent App store data points served to point out that its services revenue should continue to grow at a brisk pace.”