AAPL bet looking good-JEFFRIES

Solid Sep Quarter Results… Especially Given FX and Russia. Apple reported Sep Q revenue of $90.1bn (+8% Y/Y, +14% CC) versus the Street’s $88.8bn expectation. iPhone revenue totaled $42.6bn (+10% Y/Y) versus the $43.0bn consensus. Management noted that FX impact in the quarter was a 600bps headwind. We assume Russia is still about a 150bps headwind as well. If we also assume the channel fill and backorder completion contributed 2/3 of Mac’s 25% Y/Y growth, that’s about 190bps of Y/Y growth that’s inorganic. Netting all this out, we think the business grew about 14% organically constant currency. On the bottom line, GAAP EPS hit $1.29 versus the $1.27 consensus.

December Outlook… Absorbing Massive Headwinds, Mostly FX. The company still isn’t providing guidance and only offering guide rails for modeling the coming quarter. By our estimate they’re taking expectations up slightly even with a massive FX impact. For December, they’re expecting revenue to decelerate versus the 8% in the Sep quarter in Y/Y terms. That’s inclusive of a 1,000 bps Y/Y headwind from FX. We presume Russia is still a 150 bps Y/Y headwind as well. By our estimate, the top line guidance implies approximately 4-8% Y/Y growth or revenue of $129.0bn-$134.0bn. Adjusting for the headwinds/tailwinds noted above, base business constant currency organic growth feels more like 17.5% Y/Y. The midpoint of the unadjusted guidance implies 6% Y/Y growth and comes in 2% above the $128.4bn consensus. On the bottom line, this translates to approximately $2.17 in EPS which is also 2% above the $2.13 consensus.

Mac, Wearables and Smartphone Upgraders/Switchers Drove the Quarter… We took away a number of other notable positives for the quarter. The Mac business seems to be on fire driven by a fully refreshed portfolio powered by Apple silicon. While we think channel fill and backorder flush drove 2/3rds of the Y/Y growth, that still means Mac grew 8% growth. That’s notable against declines for the broader PC market. Wearable’s were strong too totaling $9.7bn in the quarter and 6% ahead of consensus. Lastly, management noted they’re still seeing record upgraders and switchers for iPhone with double-digit growth in each. We see that representative of a solid product cycle for iPhone 14 and lower competitive intensity after Huawei left the market.
Lowering Estimates, Mostly FX… We’re lowering our FY’23 revenue / EPS projections from $417.8bn / $6.70, to $411.0bn / $6.45, respectively. The bulk of our revision is driven by FX. We continue to rate the shares Buy.