Apple near-term setup seen as ‘challenging’ going into earnings: Morgan Stanley

Apple (NASDAQ:AAPL) is slated to report fiscal fourth-quarter results on Oct. 31 and while the long-term thesis is intact, the near-term set up is “challenging,” given historical context, Morgan Stanley said.

“We expect Apple to post a strong Sept Q top- and bottom-line beat – led by late-cycle strength in the iPhone 15 – but guide Dec Q revenue ($125B, or 4.5% Y/Y growth) and EPS (of $2.36) 1-2% below Street forecasts, which conservatively embed a lower iPhone build outlook than … team currently forecasts,” analyst Erik Woodring wrote in a note to clients.

Woodring, who has an Overweight rating and $273 price target on Apple, said he has not heard of any iPhone build cuts, but said he would characterize demand as “mixed.”

“Historically, amidst mixed demand, iPhone builds are cut by 3M units, on average, in the December quarter, which is exactly what we are embedding in our updated forecast,” Woodring wrote. “As a result, and with Apple shares trading at 32x our FY25 EPS / just below all-time highs, we see a tactically tougher setup into earnings next week.”

A consensus of analysts expects Apple to earn $1.55 per share on $94.23B in revenue for the coming quarter.

Apple shares fell 1.4% in early trading on Tuesday.