By Senad Karaahmetovic
Citi analysts reiterated a Buy rating and a $185 per share price target on Citi stock amid fears the company could underperform given the weakening consumer sentiment.
Analysts told clients in a note yesterday that he is "not fearful or concerned about Apple's (NASDAQ:AAPL) upcoming earnings report on October 27, despite media and investor concerns."
He remains positive on Apple stock mostly due to the following 5 reasons:
- iPhone 14 build is on track to meet c90 million units in H2, the analysts sees a foldable phone in 2023;
- Mix shift continues to skew away from lower-priced Android phones;
- A ~$90 bln stock buyback, which lends support to Apple stock;
- Sticky services revenues and potential for higher margins; and
- New product category launches such as AR/VR headsets and Apple Car in 2025+.
As far as the Q3 earnings report is concerned, the analysts note that FX is likely to offer "significant headwinds," even worse than 600bps guided. Moreover, the analysts are also concerned about the slowdown in App Store revenue growth. Overall, the analysts' estimates are below the Street.
"While our estimates are below consensus, we note buyside expectations have largely been trimmed. Shares now trading at ~1.4-1.5x relative PE, which we believe is reasonable given competitive moat, strong FCF generation, and balance sheet strength," Citi analysts concluded.