After 26% rally in Apple's stock this year, strong earnings are already priced in, says JPMorgan

Published Mon, Jul 27 20208:53 AM EDT

(This story is for CNBC Pro subscribers only.) Apple is slated to post strong earnings this week but investors shouldn't expect the stock to move higher on the results, according to JPMorgan. The Wall Street firm — which has a buy rating on Apple — said the Tim Cook-led technology giant's stock has run up too much in the past three months for strong earnings on Thursday to move the stock higher. "We believe investors looking for further upside have to focus on the longer-term earnings trajectory rather than expect near-term upside, as the likelihood of an earnings beat in F3Q (Jun) as well as strong early 5G cycle volumes (driving upside to calendar 2H20 estimates) appear to be priced in," JPMorgan analyst Samik Chatterjee told clients. Shares of Apple have rallied nearly 31% in the last three months, compared to the S & P 500 which has returned almost 12% in the same time. Year-to-date, Apple stock is up more than 26%. The company has been one of the beneficiaries of easing restrictions and normalization in demand trends from the pandemic, said JPMorgan. However, the stock is now trading close to its 2021 earnings multiple, investors need to focus on long-term upside for Apple. JPMorgan is expecting third quarter earnings of $1.97 per share on revenue of $49 billion for Apple. Analysts on Wall Street are expecting earnings per share of $2.04 on revenue of $52 billion. "We do not rule out the likelihood of earnings exceeding consensus led by greater than expected offset from WFH benefits; although, we do not expect investors to be surprised as much following the outperformance to lowered expectations in F2Q," said Chatterjee. Chatterjee said he expects work-from-home trends to offset retail headwinds, as Apple was forced to close stores during the coronavirus pandemic. The firm raised its iPhone volume forecast to 26 million units from 21 million until, led by better iPhone SE and iPhone 11 demand. JPMorgan also raised its estimates on Macs and iPads. JPMorgan raised its 12-month price target on Apple to $425 per share from $365 per share, implying about 13% upside to for Apple in the next year. Shares of Apple ticked 1.3% higher in premarket trading on Monday. — With reporting from CNBC's Michael Bloom.

Apple CEO Tim Cook

Brooks Kraft/Apple Inc/Handout via Reuters

(This story is for CNBC Pro subscribers only.)

Apple is slated to post strong earnings this week but investors shouldn't expect the stock to move higher on the results, according to JPMorgan.

The Wall Street firm — which has a buy rating on Apple — said the Tim Cook-led technology giant's stock has run up too much in the past three months for strong earnings on Thursday to move the stock higher.

"We believe investors looking for further upside have to focus on the longer-term earnings trajectory rather than expect near-term upside, as the likelihood of an earnings beat in F3Q (Jun) as well as strong early 5G cycle volumes (driving upside to calendar 2H20 estimates) appear to be priced in," JPMorgan analyst Samik Chatterjee told clients.