BofA Securities wrote in a report that its operating income and EPS forecasts on Apple (AAPL.US) for 2FQ ending March were higher than market consensus. This was mainly due to the broker's estimate that sales of the company's Vision Pro could reach US$1 billion, which was not expected to be reflected in market forecasts. However, the broker lowered its iPhone sales forecast for 3FQ ending June to 40 million units, down from 43 million units, while the market was expecting 43.6 million units, due to weak demand.
BofAS forecasted Apple's operating income and EPS for 3FQ to be US$81.7 billion and US$1.32, compared to the consensus forecast of US$83.8 billion and US$1.33. The broker noted that the company's share price has reflected the weak demand environment. The broker's overall forecast for Apple this year remained unchanged, with the company benefiting from the advantages of GenAI, higher gross margins and service momentum.
BofAS also noted Apple's recent abundance of catalysts, including a renewed improvement of capital return at earnings, GenAI announcements at the company's annual Worldwide Developers Conference, the launch of new iPhones in the autumn, and a renewed acceleration in gross profit dollar growth in each quarter.
BofAS maintained its forecast for double-digit YoY growth in Apple's services business, which it expected to deliver higher margins. The broker also expected that Apple will continue to see strong growth in operating income from licensing, App Store, iCloud and subscriptions.
BofAS lowered its forecast of Apple's operating revenue and EPS to US$393 billion and US$6.68 respectively for FY24 ending September. It also expected the company to receive US$90 billion in new authorisations. The broker modelled a 5% increase in the company's dividend starting in 3FQ, as Apple remained committed to achieving net cash neutrality.
BofAS expected the company's cash flow to remain strong and defensive, with free cash flow projected to be US$100 billion and US$108 billion in FY24/FY25 respectively. The broker maintained Apple's target price at US$225, reiterated its Buy rating, and selected it as a top pick for 2024.
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