Apple Q1 earnings preview: what to expect?

The strength of its product pipeline and the ability to offset macro headwinds positions Apple Inc (NASDAQ: AAPL) well for a period of outperformance, says BofA Securities’ Wamsi Mohan, ahead of Q1 results the iPhone maker is scheduled to report later today.

Mohan sees a 30% upside in Apple

Mohan has a “buy” rating on Apple with a price target of $210 that represents a 30% upside from here. This afternoon on CNBC’s “TechCheck”, he said:

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We believe a lot of the worries surrounding the iPhone cycle are baked in. Stability, cash flow, pricing power, balance sheet – all of these things are super important at a time when the Fed is tightening. That’s where Apple screens well.

Apple’s iPhone 12 had a staggered launch last year that eventually resulted in a very strong March quarter. Therefore, its guidance for the comparable quarter tonight will matter the most, in that if Apple signals confidence that it will beat comps in Q2, it’ll be a positive catalyst for the stock, added Mohan.

Apple’s take on supply constraints

In October, Apple said supply headwinds could result in a $6.0 billion hit in the holiday quarter, but Mohan is convinced the American multinational will report a slightly muted impact tonight.

Apple has been extremely good at navigating supply constraints, but people will focus on how much is the supply chain expected to impact the iPhone 14 launch timing. Does availability continue to be a problem in the near term?

He expects revenue from iPad to be on the weaker side in Q1 since that’s where Apple chose to cut back from amidst supply constraints to maximize component availability for the iPhone 13, which will be “very strong”. Mohan doesn’t expect notable updates on the AR/VR front in the earnings call on Thursday.