Apple Earnings: Hardware Headwinds Look Ominous; Shares Overvalued Versus $150 Fair Value Estimate

Apple's fiscal second-quarter results surpassed our estimates, thanks to outperformance in iPhone and services revenue. We had been anticipating a slowdown in the firm’s hardware products following several years of strong growth related to COVID-19-induced work- and learning-from home trends, as well as the initial rollout of 5G. Although most segments fell on a year-over-year basis, we were pleased to see the iPhone and services units exhibited modest growth. We remain cautious of the next several quarters for the firm as macroeconomic headwinds persist, though we concede that wide-moat Apple will fare better than many of its smartphone peers. Our fair value estimate remains $150 per share, and shares appear overvalued at current levels.