Abstract| JP Morgan AAPL Apple F2Q23 Review

1. Apple has shown positive performance in a challenging macroeconomic environment, with resilience due to share gains and pricing power.

2. The company's strength in emerging markets, particularly India, is seen as a growth opportunity.

3. Apple's second-quarter results beat consensus forecasts, with stronger revenue in various product categories, including iPhone, iPad, Mac, Wearables, and Services.

4. While service growth is recovering slower due to macro-driven customer spending pullbacks, products are proving more resilient, which is expected to lead to modest year-over-year growth, offsetting the slowdown in services.                 

The JP Morgan’s review reveals Apple's positive performance in a tough macroeconomic environment, despite challenges faced by smartphone chipset suppliers like Qualcomm. The company is showing resilience due to share gains, pricing power, and focus on growth opportunities in emerging markets like India. The same pricing power is driving robust product gross margins, and the company is expected to continue to perform well in other product categories like Macs and iPads. The only area where investors may have wanted more improvement is in Services. Overall, the results and guidance are seen as reassuring to investors, justifying the premium valuation of 26x earnings for AAPL shares.

The review highlights Apple's strong performance in emerging markets, especially in India. The company exceeded revenue expectations in the second quarter of 2023 and experienced record-breaking revenue totals in countries such as Mexico, Indonesia, Philippines, Saudi Arabia, Turkey, and UAE. Apple also mentioned its optimistic outlook on India due to its expanding presence there, including an online store and two new retail stores, and a growing middle class that is increasing the country's relevance to Apple.

Apple's financial results for the second quarter of 2023 showed earnings beating consensus forecasts due to modestly better revenue. Total revenues were $94.8 billion, which were slightly below JPMe expectations but higher than the consensus estimate. The review details the revenue breakdown by product category, including iPhone, iPad, Mac, Wearables, and Services, and compares these figures to JPMe and consensus estimates. Gross margins were also reported, as well as earnings per share (EPS), which came in higher than JPMe and consensus forecasts.

The review provides guidance from Apple for the third quarter of 2023, which is better than expected but below sell-side estimates. While Apple did not provide specific revenue guidance, it disclosed that year-over-year revenue growth will be similar to second quarter levels, with a slight improvement in foreign exchange headwinds. The report also notes that Apple's expected year-over-year revenue growth for services is lower than JPMe and consensus expectations heading into the print. Moreover, the company provided guidance on gross margins and opex, implying operating margins of over 27% at the mid-point, which is slightly higher than JPMe forecasts but lower than consensus estimates.

The estimates for Apple's performance are largely unchanged, with products proving more resilient than services. While service growth is recovering slower due to macro-driven customer spending pullbacks in areas such as advertising and gaming, the report states that this is offset by the greater resilience in product revenue, which is estimated to grow modestly year-over-year in the next couple of quarters when adjusted for currency headwinds. The article concludes that the current price target for Apple's stock remains unchanged at $190 for December 2023.