Apple at $153: Look whose targets are underwater now

I dialed the WayBack Machine to an article of PED’s about a year ago (had to search on my email, but it was there, I promise):

I’d note that Brian White was, as usual, over the top. But Gene Muster nailed it at literally $153!

—————
What analysts are saying in advance of Apple’s Q3 2016

Could expectations be any lower?
Apple will report results for the third fiscal quarter of 2016 on July 26. Here are excerpts from the analysts’ notes I’ve seen. More as they come in.

Jim Suva, Citi: Look Out…Look Out… Look Out… We are lowering our estimates for June and September quarters given potential for lower demand from macro uncertainty (Brexit related), currency volatility and lengthening replacement cycles (average replacement rate has gone from ~24 months in CY13 to ~28 months recently and our model implies replacement rates could extend to 30-36 months, see figure 3). Our supply chain checks suggest demand strength in iPhone SE as partial offset… Near term, we expect AAPL shares to remain range bound as data points during the seasonally slow summer and ahead of iPhone 7 launch. We believe investors will soon start to: 1) look out beyond this near term stock price weakness on near term sales and gross margin disappointment. Buy. $115.

Abhey Lamba, Mizuho: Major Estimate Cuts Behind Us? We believe revenue could come in slightly below consensus on a challenging smartphone environment; however, downside is largely expected at this point. While SepQ estimates may need to be revised modestly as well, our checks suggest that the bulk of estimate cuts could be behind us with expectations for 2H being reasonable at this point. We continue to see valuation compelling at current levels with potential for upside to estimates. Buy. $120.

Brian White, Drexel Hamilton: Apple Monitor Delivers a Better than Seasonal June Performance. As of this morning, all of the companies in our Apple Monitor have reported June sales and the performance was better than historical averages. With the iPhone 7 supply chain starting to ramp, we expect MoM sales growth to continue this summer. Given the rising macro concerns and another round of “gloom and doom” circling Apple, the stock has come under more pressure over the past month and we believe represents an attractive buying opportunity. Moreover, our Apple model estimates a bottom in the sales cycle, profit cycle and iPhone unit cycle in the June quarter. Buy. $185.

Gene Munster, Piper Jaffray: Early Consumer Interest In iPhone 7 As Expected. Based on our survey of 400 US iPhone owners, 14.8% currently plan to upgrade to the iPhone 7 in the fall, while 29% may upgrade to the new device. We view this as in-line with our expectations given we are still over two months away from the official launch and most consumers are not tuned into the Apple rumor cycle. We expect the percentage of consumers that plan to upgrade to the iPhone 7 to increase following the announcement, even if it is not a significant technology upgrade. Overweight. $153.

Andrew Uerkwitz, Oppenheimer: Quarter Unlikely to Change Minds. We reiterate our cautious view for the iPhone 7, lower our estimates again, and remind investors of our longer term view as we look beyond the upcoming product cycle. We believe questions (China, replacement cycle) debated in previous earnings will matter little, as investors will focus on iPhone 7 release in the fall. We do not expect that F3Q results and F4Q16 guidance will change our view on Apple. We expect the iPhone 7 product cycle to be weak due to lack of major improvements. We lower our FY17 revenue/EPS estimates from $222B/$9.04 to $209B/$8.18 based on assumed lower iPhone and Apple Watch shipments. We maintain that more dramatic changes will come to the iPhone in 2017. Market perform. No price target.

Tavis McCourt, Raymond James: Adjusting Gross Margins as Demand Likely to Skew to Lower Margin SKUs. We believe institutional investors are increasingly pessimistic as to Apple’s near-term financial performance, so it is unclear if EPS downside vs. consensus will lead to a new, lower trading range for the shares, in our view. However, based on analysis of the last three iPhone hardware refreshes combined with other expectations around the iPhone 7, we expect our and consensus GM is too high for the next few quarters, forcing us to lower our EPS modestly. Apple shares remain very inexpensive, and thus despite likely continued EPS revisions lower in the near term, we maintain our Market Perform rating. No price target.

————–