Piper Sandler expects Apple growth to continue, margins to expand

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in AAPL Investors
Following Apple's strong March quarter results, investment bank Piper Sandler believes Apple is well-positioned to continue seeing strong growth and wider margins throughout 2021.

Credit: Andrew O'Hara, AppleInsider
Credit: Andrew O'Hara, AppleInsider


In a note to investors seen by AppleInsider, Piper Sandler analyst Harsh Kumar notes that Apple significantly beat Wall Street expectations on the top and bottom lines.

On the results, Kumar says a major highlight is Apple's report of 42.5% gross margins during the quarter, which represents a 270 basis point sequential increase. That rate also handily beat Wall Street expectations of 39.7%. Kumar attributes it to a favorable mix and higher revenue, as well as the lack of foreign exchange headwinds.

Although Apple declined to provide specific revenue guidance for the June quarter, Kumar called Apple's expectation of June quarter gross margins dropping only 50 basis points impressive.

The analyst views that dynamic positively. He expects Apple's gross margins to steadily expand as its software and services become a larger portion of its overall revenue mix.

Even with the relatively lower decline in gross margins, the June quarter is still the bottom for fiscal 2021. That's because Apple expects greater than usual seasonal declines based on the later timing of the iPhone 12 and iPhone 12 Pro and supply constraint headwinds contributing to a $3 billion to $4 billion revenue dip.

The analyst believes Apple continues to sport a strong balance sheet, with a solid cash position and significant free cash flow generation.

Kumar maintains his 12-month AAPL price target of $160. That's based on a 31x price-to-earnings multiple on Piper Sandler's 2021 earnings estimates. The analyst reiterates his Overweight rating on AAPL shares.

Comments

  • Reply 1 of 2
    lkrupplkrupp Posts: 9,008member
    Does anyone remember the good old days when analysts were always ready to start the Apple death spiral clock? Apple had one foot in the grave and the other foot on a banana peel. It was all over they gleefully spewed. My how a couple of trillion dollars can change an analyst’s mind. Even Goldman Sachs' Rod Hall has flipped.
    edited April 29 bloggerblog
  • Reply 2 of 2
    bloggerblogbloggerblog Posts: 2,004member
    lkrupp said:
    Does anyone remember the good old days when analysts were always ready to start the Apple death spiral clock? Apple had one foot in the grave and the other foot on a banana peel. It was all over they gleefully spewed. My how a couple of trillion dollars can change an analyst’s mind. Even Goldman Sachs' Rod Hall has flipped.
    Yeah, Apple has story that is unrivaled by any other tech company, it beat every analyst's wet dream, it reads like a fiction book. I remember being a fan of BeOS and a lesser fan of NeXT. I used a NeXT application called SignaStation, the OS seemed buggy at the time, and being an Amiga fan BeOS made more sense to me at the time. But not anymore lol
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