Credit Suisse: Apple’s Supply Chain ‘Better Than Feared’

First sign of positive movement.

Credit Suisse analyst Kulbinder Garcha declared Apple’s Asia supply chain is “stabilizing” and may be “better than feared,” in a note to clients on Thursday.

“This improvement could be the first positive movement since the Apple iPhone supply chain cuts began late last year,” he wrote.

Garcha raised his earnings estimates for calendar years 2016 and 2017 by 3.5% and 1.2%, respectively.

“We continue to believe,” he told clients, “that with high retention rates, continued installed base growth, and the optionality of a smaller 4-inch iPhone, Apple remains an Outperform.”

“Apple looks inexpensive on a P/E ex-cash basis of 9x in the context of material capital return, sustainable revenues, and a powerful ecosystem. We apply a ~12x multiple and add back fully taxed net cash per share of ~$15, giving upside to $140.”

In a separate note, Mizuho’s Abhey Lamba reiterated a Buy rating on Apple and a $120 price target, despite “lackluster” data points from his firm’s Japan-based supply chain team.

“Our positive stance on the stock is based on fundamental value of Apple’s customers and its ability to retain/monetize the installed base. We think the stock is likely to perform once some of these supply chain data points inflect, which could occur in mid-2016.”

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