Bank of America Projects Apple Will Top Q3 Estimates Ahead of July 30 Report

Bank of America has reiterated its Buy rating on Apple (AAPL) with a $380 price target, stating in a note to investors that it expects the technology giant to beat consensus estimates in its upcoming fiscal third-quarter results. The earnings report, scheduled for July 30, will also mark the final one for departing CEO Tim Cook.

Analyst Expectations for Q3

In a note published Monday, BofA analyst Wamsi Mohan projected Apple's fiscal third-quarter revenue will reach $109 billion with earnings per share (EPS) of $1.89. These figures are slightly ahead of Wall Street's consensus estimates, which stand at $108 billion in revenue and $1.87 in EPS.

BofA's revenue forecast implies 16% year-over-year growth, which falls within Apple's own guidance range of 14-17%. The analyst highlighted that investor focus will be on component cost inflation, the durability of gross margins, and any commentary surrounding the CEO transition.

Outlook for Margins and Services

The bank anticipates near-term pressure on product gross margins, which it expects to decline sequentially in the June and September quarters. However, Mohan described this pressure as "transitory," forecasting a recovery to 38.5% in the December quarter, driven by the launch of new, higher-priced iPhone models.

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For Apple's crucial Services division, BofA modeled 14% year-over-year revenue growth. The note acknowledged that App Store growth has slowed to 3.2% year-over-year from 9.8% in the previous quarter, but expects this to be offset by continued strength in iCloud and Licensing revenues.

Caution on Staggered iPhone Launch

While optimistic about the third quarter, BofA adopted a more conservative outlook for the second half of the calendar year due to a planned "staggered launch of iPhones." The firm anticipates that Pro, Pro Max, and Fold models will launch in September, while the base and Air models will arrive in March.

This staggered cadence could "cause some volatility," leading BofA to model fiscal fourth-quarter results below current Street estimates. The bank's forecast is for $106 billion in revenue and $1.88 in EPS, compared to the consensus of $114 billion and $2.01, respectively.