Q2 In Line/Weak Management Guidance for Q3

Q2-FY2023 (quarter ended March 2023) revenue and net income were down 3% YoY, but in line with our forecasts. Q1 revenue was down 6% YoY.
Stronger revenue from services (5% YoY) and iPhone sales (2% YoY) was more than offset by weaker sales of Mac (-31% YoY) and iPad (-13% YoY). Management expects Q3 sales to contract 3% YoY as well.
On a positive note, iPhone sales (2% YoY) outperformed the global smartphone market, which contracted 13% YoY. iPhone’s share of the global smartphone market increased 3 ppt YoY, to 21%. As of February 2023, there were 2B Apple devices in circulation globally, up from 1.8B in January 2022.
We believe continued growth in revenue from services is highly promising, bringing more stability to AAPL’s revenue. At the end of Q2, there were 975M paid subscribers, up from 900M at the end of Q1.

We were pleased with AAPL’s recent initiatives, such as the opening of its first store in India, and the launching of new solutions, including Apple Pay Later (offering two-month loans for consumers) and Apple Card Savings (offering high-yield savings accounts).
Due to increased odds of rate cuts in H2-2023, we are expecting a rally in tech stocks. Key headwinds include slower global GDP growth, and weak 2023 sales forecasts for PCs (-7% YoY), tablets (-3% YoY), and smartphones (-4% YoY) - Source: Gartner. The IMF is projecting global GDP growth to decline to 2.8% in 2023, from 3.4% in 2022.

Key Financial Data (YE Sept 30, $M)	2017	2018	2019	2020	2021E	2022E
Cash, cash equivalent and marketable securities	268,895	237,100	205,898	191,830	184,620	189,006
Working Capital	27,831	15,410	57,101	38,321	56,547	80,773
Total Assets	375,319	365,725	338,516	323,888	327,615	341,152
Revenue	229,234	265,595	260,174	274,515	351,984	385,856
Net Income	48,351	59,531	55,256	57,411	92,361	101,182
EPS Diluted ($)	2.32	3	2.99	3.28	5.5	6.03

Relative Valuation - AAPL
EPS 2022E ($)	$6.29
EPS 2023E ($)	$6.74
Target P/E multiple for 2022E (x) - 20% premium to avg	29.1x
Target P/E Multiple for 2023E (x) - 20% premium to avg	25.9x

Fair value per share ($) - P/E Multiple (2022E)	182.81
Fair value per share ($) - P/E Multiple (2023E)	174.61

Rating and Key Data