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Apple Tests Record High on Samsung Profit Forecast, Treasury Bond Yield Retreat

Following a lackluster first half performance, Apple shares are up 14.3% since June as chipmaker forecasts suggest solid June quarter earnings for the tech giant.

Apple Inc.  (AAPL) - Get Report shares tested record highs Wednesday following a pullback in Treasury bond yields and a bullish profit outlook at rival Samsung Electronics. 

South Korea-based Samsung, the world's biggest chipmaker, said June quarter profits are likely to rise by 53% from last year to 12.5 trillion won ($11 billion) with analysts betting that an increase in semiconductor shipments, as well as stronger prices for memory chips, will offset a slowdown in handset sales.

Samsung's flash memory and DRAM chips are important components in Apple's global supply chain.

Apple was also supported by a $5 price target boost from JPMorgan, which carries an overweight rating on the tech giant, to $170.00 per share. Analyst Samik Chatterjee said that while Apple shares have underperformed "significantly" this year, resilient iPhone 12 volumes, as well as historical gains linked to September launch events, are providing upside support for the shares heading into the summer months.

"The upside pressure on volumes for the iPhone 12 series, historical outperformance in the July-September time period heading into launch event, and further catalysts in relation to outperformance for iPhone 13 volumes relative to lowered investor expectations implies a very attractive set up for the shares in the second half of the year," Chatterjee said. 

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"As we look forward to the next three to six months, we see the shares set up for a strong outperformance, similar to the trends in previous years, but likely with stronger momentum on two key reasons," Chatterjee said, noting "upside pressure to the current generation iPhone 12 product cycle, led by recent momentum and share gains in key geographies, including China" and "low expectations going into the iPhone 13 product cycle, which will likely drive an outperformance to expectations."

Apple shares were marked 1.55% higher in pre-market trading Wednesday to indicate an opening bell price of $144.123 each, supported in part by a pullback in Treasury bond yields to 1.299%, the lowest since early February. Apple hit a post-split high of $145.09 each on January 25. 

Apple is set to report its third quarter earnings on July 27, with CFO Luca Maestri cautioning investors in late April that the group is likely to experience a "steeper than usual" sequential revenue decline thanks in part to supply constraints linked to the global semiconductor shortage following Street-blasting sales of nearly $90 billion for the three months ending in March.

Apple said iPhone revenues rose 65% from last year to $47.94 billion, well ahead of the $41.7 billion Street forecast, thanks to what CEO Tim Cook called "strong demand for the iPhone 12 family".

Greater China revenues, Apple said, rose 88% from last year's pandemic trough to $17.728 billion, while overall services revenues rose 26.6% to $16.9 billion.