Apple stock rose by about 1% on Monday despite warnings that the company’s next earnings report might disappoint. The iPhone maker is due to release its next earnings report in a couple of weeks. Of course, investors that are buying Apple stock right now probably don’t care much about that report because they’re actually investing in next year’s results, betting that the iPhone 8 will be a massive hit.

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Photo by kropekk_pl (Pixabay)

Amazon stock over Apple stock

Apple stock has been a Wall Street darling for many years, and the iPhone 8 is only providing more ammunition for perma-bulls to squawk about. However, for some, the elation is starting to quiet down. In a note dated April 24, Macquarie analysts Viktor Shvets and Chetan Seth explained why they recommend Amazon stock over Apple stock in their Thematics Portfolio.

They feel that Amazon has pioneered more breakthroughs than most other companies since 1997 and that it has “caused greater disruption than almost anyone else.” They also view the company as a continual disrupter, while they have never seen Apple as a “pure disruptor.” Their Thematics Portfolio invests in “pure disruptors, with the only proviso being that the selected disruptor is unlikely to be disrupted by another disruptor (at least for a period of time).”

They describe pure disrupters as continuously evolving, which is what they say sets Amazon apart from Apple.

Apple earnings preview

Most Apple stock perma-bulls would probably decry Macquarie’s view of the company as not continually disrupting and innovating, but even they are approaching the next couple of earnings reports with reservations.

In a note dated April 20, JPMorgan analyst Rod Hall said he’s bullish on Apple for the full year based on what he thinks is “unprecedented pent-up replacement demand” and expectations for an iPhone that’s “materially different. However, he also warned that the guidance provided with this next earnings report could be a huge disappointment because the company might also expect consumers to want to hold off on their iPhone purchases until they see the iPhone 8 (or whatever the OLED model ends up being called).

He expects Apple to post $52.5 billion in sales, compared to the consensus of $53 billion and the guidance of $51.5 billion to $53.5 billion. He’s looking for a GAAP gross margin of 38.5%, compared to the consensus of 38.7% and the outlook of 38% to 39%, and GAAP earnings of $1.98 per share, versus the consensus of $2.02 per share.

A warning about Apple’s guidance

Hall warned that Wall Street might be expecting too much for the company’s June quarter, however. He is expecting $44.2 billion in revenue for Apple’s third fiscal quarter, which is short of consensus at $45.7 billion, and GAAP earnings per share of $1.53 per share, which also is lower than consensus at $1.63 per share. He projects a third quarter GAAP gross margin of 38.1%, compared to the consensus of 38.2%.

The reason he expects guidance to be weak is because he believes Apple management is expecting consumers to hold off on buying an iPhone this year. He feels there’s a “better-than-normal chance” the company will preview the iPhone 8 at its Worldwide Developers Conference on June 5, which he added may “further increase the Osbourne effect” before the OLED-equipped iPhone becomes available. He sees any pullback in Apple stock due to weak guidance as a buying opportunity but added that downside in it could be limited because of “generally positive views” of the iPhone 8 cycle.

Shares of Apple stock rose by as much as 1.11% to $143.85 during regular trading hours on Monday.