Apple to issue disappointing forecast this week, Bank of America predicts

Published Mon, May 1 202312:32 PM EDTUpdated Mon, May 1 20234:34 PM EDT

Investors should brace for lower forward guidance from tech giant Apple on Thursday, according to Bank of America. The firm reiterated a neutral rating on Apple stock, albeit with an updated price target of $173 per share, reflecting about 2% upside from Friday's closing price. Previously, the bank had a price target of $168. Apple will report quarterly results Thursday after the closing bell. Research analyst Wamsi Mohan said the firm expects Apple to at least meet consensus expectations on both earnings per share and revenue for its fiscal second quarter. Bank of America is calling for earnings of $1.40 per share on revenue of $92.4 billion, compared with the Street's expectations of $1.43 in earnings per share and $92.9 billion. "We expect stronger iPhone demand to offset weakness in other hardware categories, and Services to benefit from subscription growth while App Store to remain weak," Mohan said. AAPL YTD mountain Shares of Apple are up roughly 30% from the start of the year. That said, Bank of America is anticipating a gloomy outlook from the tech titan. Mohan said fiscal third-quarter estimates could suggest that revenue will decline by 1% year over year. The firm is forecasting earnings of $1.17 per share and revenue of $81.7 billion for that period due to weaker consumer spending and FX headwinds. Asset management firm Bernstein also noted concern on Apple last week heading into earnings. "Macs and iPads both have challenging macroeconomic headwinds and y/y compares since the prior year benefited from the redesigned MacBook Pro with M1 chip," Mohan said. "This year we see headwinds from both lower consumer spend as well as slowing Enterprise spending." Mohan also noted further points of contention for Apple include ongoing negotiations with Google and the rise of search engine Bing . He said that if a peer and rival as large as Samsung were to replace Google search with Bing, that could push Apple to do the same with its line of products. "If a large smartphone company like Samsung does indeed move away from Google, we expect that would put pressure on Google to increase payments to Apple to remain the default on the iOS platform," he said. Another key question for the company, Mohan said, is the size of Apple's expected stock buyback. The analyst predicts an authorization of $80 billion in buybacks, which is just below the previous two years, which saw $90 billion. — CNBC's Michael Bloom contributed to this report.