With sales softening for iPhones, Macs and iPads, Apple could be headed for a year-over-year revenue decline for the fiscal year ending in September.
That's according to Bernstein analyst Toni Sacconaghi, who remains lukewarm on the prospects for Apple (ticker: AAPL) shares.
Apple will report financial results for the December quarter on Feb. 2. Wall Street consensus estimates call for revenue of $122 billion, down 1.5% from a year ago, and profit of $1.95 a share, down from $2.10. Sacconaghi is a little more optimistic: He projects $124 billion in revenue and profit of $2 a share. Sacconaghi noted, in particular, that Apple has a 14 -week quarter this time, providing a 7% tailwind to the top line.
Analysts' estimates in the quarter recently have ratcheted down sharply, following Covid-related iPhone 14 production problems late in 2022. But those issues seems to largely alleviated.
Nonetheless, Sacconaghi continues to think that Wall Street estimates are too high for both the March quarter and for all of fiscal 2023, due to a combination of factors, including an uncertain economic environment.
For fiscal 2023, Sacconaghi projects sales of $387 billion -- down 2% from fiscal 2022 -- and below consensus at $403 billion. He sees profits of $5.84 a share; consensus calls for $6.18. Sacconaghi expects an 8% year-over-year decline in iPhone units this year to 222 million. He also noted that Apple's guidance for the quarter called for Mac revenue to decline "substantially" due to an unusually difficult year-earlier comparison.
For the March quarter, Sacconaghi is modeling revenue of $91.4 billion, well below consensus at $97.3 billion.
Sacconaghi is feeling ambivalent about the outlook for Apple shares. "On one hand, we worry that Apple was a Covid beneficiary that over-earned during the pandemic and that consensus numbers are too high for FY 23 and will need to be revised down," he wrote. "Moreover, Apple's valuation appears relatively full vs. other tech and consumer companies."
But he added that investors are likely expecting Apple's estimates to decline. He thinks there's a possibility that investors could look forward to a stronger iPhone cycle in fiscal 2024, along with the expected launch of an artificial and virtual reality device. Sacconaghi said he sees the risk-reward as "neutral to slightly negative." Sacconaghi maintained his Market Perform rating and $125 target price on Apple shares, which on Tuesday was up 1% at $142.53.