On the whole, buy-side analysts have been more bullish on Apple’s prospects than those on the sell side, but both classes have been revising their EPS and revenue estimates upward over recent months.
That may be why Tim Cook is smiling here.
Anyway, Moskowitz made a few good points in his newest note to clients, and here’s what they were:
1) Pay attention to gross margins and iPhone production.
I think investors will focus more on the outlook, following the Sep-Q upside preannouncement. In my view, the key hurdle is gross margin. If the gross margin outlook can firmly stay above 35%, then the stock should continue to work. The next potential catalyst is supply chain checks later this quarter related to iPhone production activity for both Dec-Q and Mar-Q.
2) Don’t forget about the product rollouts.
Moskowitz also mentions, “With new product launches at Apple, in general, there can be temporary drags on gross margin,” adding that in the current quarter, Apple Inc. (NASDAQ:AAPL) has a bevy of new products that may affect this number, including the global launch of the iPhone 5S and 5C, the iPad Air next month, and the iPad Mini/Retina closer to Christmas.
3) ‘The stage has been set.’
Here’s what Moskowitz had to say about the Street’s consensus estimates, which he appears to be bullish on over the intermediate term:
Overall, I think the stage has been set for Apple consensus estimates to exhibit a series of upward revisions in the near to mid term. In contrast, other technology companies are likely to face more headwinds, particularly in light of this earnings season’s disappointments in IT Hardware (IBM, EMC, and Xerox). As a result, the Apple story could become a little shinier for investors, which is why the stock is one of the top picks in my coverage list.
This is good news for those who believe tech equity investors are behaving cyclically at the moment. If there are in fact more “headwinds” for Apple Inc. (NASDAQ:AAPL)’s peers, this could simply allow more capital to rotate into Apple stock. Keep an eye on Wall Street estimates.