Morgan Stanley issued a report on Tuesday suggesting that Apple Inc. could experience modest short-term upside ahead of its upcoming earnings release, viewing the report as a potential window for resetting market sentiment.
The firm anticipates that Apple's fiscal quarter ending in March will slightly exceed market expectations, with revenue and earnings per share projected to be about 1% to 2% above consensus estimates. However, the report also noted that supply constraints may limit the potential for more significant outperformance.
For the following fiscal quarter, Morgan Stanley expects revenue to come in above Wall Street forecasts, though gross margins may decline due to rising memory costs. The bank indicated that strong iPhone demand, Mac sales, and performance in the services segment could help offset some of the cost pressures.
Beyond near-term results, the report highlighted several potential catalysts for later this year, including the annual developers conference in June and a possible new product cycle in the second half. It also emphasized Apple's robust free cash flow generation compared to other large technology peers that are increasing capital expenditures.
Morgan Stanley maintained its "overweight" rating on Apple and suggested that if product momentum improves, the stock has room for further valuation expansion.
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