Apple (NASDAQ:) is set to report its fiscal 2024 second-quarter earnings on May 2, and Morgan Stanley analysts expect the iPhone maker to slightly beat consensus estimates.
However, they expect June quarter revenue guidance and earnings per share estimates to be 4% to 7% below Wall Street expectations, “which we believe the market will punish,” the analysts wrote.
However, they note differences from three months earlier: Apple’s share price fell 12%, valuation fell 2.5 times, and consumer sentiment and attitudes became more negative.
Looking ahead, they expect the next big catalyst for AAPL’s earnings growth to be Apple’s Worldwide Developers Conference (WWDC), where Morgan Stanley expects the company to unveil new AI software developments.
“As a result, there is a chance that Apple could see a sharp upside/contraction on the back of a ‘better-than-expected’ earnings report/guidance,” the analysts said in a note.
“This creates a difficult situation and we do not believe investors necessarily need to enter into it,” they added.
But given the 12% downside from the bearish estimate and the 30% upside from the new $210 price target, as well as expectations for an AI-powered iPhone cycle in fiscal 2025, Morgan Stanley maintains its rating “above the market” according to AAPL rating.