Apple stock has faced various concerns leading up to its fiscal-first-quarter earnings. However, Evercore analyst Anit Daryanani believes that this could present a tactical opportunity for investors who have confidence in the iPhone maker's ability to avoid any unpleasant surprises.
Currently, Apple shares are up 0.3% at $189.10 in premarket trading on Friday. While the stock has shown positive year-to-date performance due to a recent technology-stock rally, it continues to trail behind other tech peers as the December-quarter earnings report on Feb. 1 approaches.
Daryanani still maintains an Outperform rating on Apple stock, with a target price of $220. Interestingly, he believes that Apple does not necessarily have to surpass expectations in its upcoming earnings to see a positive impact on the stock.
In a research note, Daryanani stated, "We maintain our bullish stance on Apple and believe that buy-side expectations are likely lower than the current consensus. Therefore, even an in-line quarter would likely drive upside, especially if Apple can demonstrate consistent solid iPhone performance in China."
Daryanani is confident that Apple will report slightly better-than-expected December-quarter earnings. According to a FactSet poll of estimates, current expectations sit at earnings per share of $2.10 and revenue of $118.13 billion. Despite concerns surrounding sluggish demand in China, he predicts stable iPhone revenue for the company.
Overall, amid the uncertainty surrounding Apple's upcoming earnings report, many investors see a potential buying opportunity for the stock. With its consistent performance and optimistic outlook, Apple remains an appealing investment option.
The Impact of the Department of Justice Lawsuit on Apple's Earnings
One noteworthy concern that Apple's upcoming earnings report may not address is the potential repercussions of the Department of Justice's lawsuit against Google's parent company, Alphabet. This legal battle has the potential to jeopardize the payments that Google makes to secure its position as the default search engine on iPhones and in the Safari web browser. Currently, this arrangement is estimated to generate a substantial $16 billion in annual net profit for Apple.
Despite this significant antitrust issue gaining attention from investors, it is unlikely that Apple will comment on it during the earnings call, according to Daryanani.
Addressing Antitrust Concerns in Europe
While larger antitrust issues loom over Apple's earnings, the company managed to resolve a smaller concern put forth by European regulators regarding its Apple Pay app. As a response, Apple has now granted access to third-party mobile wallet and payment services, addressing the concerns raised. The European Commission has published the proposed commitments and welcomes public input. If a market test shows that these commitments effectively address competition concerns, they may be legally binding on Apple for a period of 10 years.
The Impact on Competitors, like PayPal Holdings
Apple Pay's success has led to increased skepticism among investors regarding other payment companies such as PayPal Holdings. In premarket trading on Friday, PayPal Holdings' stock increased by 1.7%.
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