Analysts stand by Apple, say iPhone maker's 'flywheel keeps spinning' despite disappointing earnings

Published Fri, Feb 3 20236:06 AM EST

Analysts aren't giving up on Apple despite the tech giant's near-term headwinds. The iPhone maker on Thursday posted its largest quarterly decline in revenue since 2016 . It also posted weaker-than-expected results in multiple areas as it grappled with a strong dollar, macro issues and production problems in China that constrained iPhone 14 Pro and Pro Max production. Sales for the holiday-quarter were also 5% lower over last year, representing the company's first year-over-year decline since 2019. But despite the concerning print and near-term headwinds, analysts are standing by the tech bellwether, saying that Apple's long-term strength outweighs the negatives. "Despite near-term macro and supply headwinds, the Apple flywheel keeps spinning," said Morgan Stanley's Erik Woodring, who retained his price target and overweight rating. According to Woodring, any weakness in shares post-earnings also creates an ideal buying opportunity. At the same time, he anticipates improving iPhone revenues in the March quarter, especially as the company guided for "decade high" gross margins even with year-over-year revenue declines. "Taking a step back, it's rare to see Apple miss and guide down in a quarter, but we believe the long-term positives from tonight's report outweigh the short-term negatives," he said, citing the company's gross margins, strong ecosystem and increasing spend per user. Evercore ISI's Amit Daryanani agreed with Woodring's take, maintaining his outperform rating and his "trust" in CEO Tim Cook in a Thursday note. "This print and guide continues to validate not just the diversity of AAPL's revenue stream but also highlights the 'consumer staple' nature of iPhones vs. investor perception of iPhones as a discretionary technology product," he wrote, saying that Apple's installed base, which grew to more than $2 billion active devices should offer a "sizable monetization opportunity." JPMorgan's Samik Chatterjee retained his overweight rating on Apple, but trimmed his price target on shares to $175 from $180 and adjusted revenue estimates for the current quarter. Chatterjee said the "conservative guide" from the company and improving China conditions should create a better setup for shares going forward. AAPL 5D mountain Apple falls after disappointing earnings But Apple isn't out of the macro woods just yet, according to some analysts. Bank of America's Wamsi Mohan retained a neutral rating on shares, saying concerns such as lower consumer spending and tough year-over-year comparisons outweigh the near-term positives. The disappointing print, may, however, offer a much needed reset and solid setup for 2024, said Bernstein's Toni Sacconaghi. "We net out mixed on Apple's results. On one hand, Q2 revenues are not a slam dunk, revenues will almost certainly decline in FY23, and valuation remains elevated vs. history and tech peers," he said in a Friday note. "On the other, numbers are being reset, and investors may begin to look forward to a better 2024, akin to 2019, when Apple last saw revenues decline." Shares were last down more than 3% premarket. — CNBC's Michael Bloom contributed reporting