Apple NASDAQ:AAPL heads into fiscal third-quarter earnings with Bank of America expecting a modest beat, even as weaker product margins and a staggered iPhone launch create some near-term pressure.
BofA reiterated its Buy rating and $380 price target. Analyst Wamsi Mohan forecasts revenue of $109 billion and EPS of $1.89, slightly above Wall Street estimates of $108 billion and $1.87. He expects revenue to rise 16% from a year earlier.
Apple sells iPhones, Macs and wearables while generating high-margin recurring revenue from services such as iCloud, the App Store and licensing agreements. BofA sees Services revenue growing 14%, with gross margins around 76.5%.
The bigger concern is hardware profitability. Product gross margin is expected to fall to 36.8% in June and 34.1% in September before recovering to 38.5% in December as higher-priced iPhones launch and tariff costs potentially ease by $3 billion.