Apple’s boffo Q4: What the analysts are saying

Eleven price targets hikes, a few sour notes.

Excerpts from the reports I’ve seen. New ones up top.

Jun Zhang, Rosenblatt:  Strong Macbook Sales, Strong iPhone X Preorders, 3D Sensing Advantage. Management guided inline for CQ4, which indicates to us that Apple will continue ramping iPhone 8/Plus shipments for the holiday season while also becoming more comfortable ramping the iPhone X in the December quarter. We also believe the Macbook, Apple Watch and TV also contributed to the inline guidance to offset some of the slower iPhone ramp and possible iPhone 8 cuts. Upgrade from Neutral to Buy. Raise price target from $150 to $180.

Laura Martin, Needham: Buy. Raise price target to $200 from $175. 

Sherri Scribner, Deutsche Bank. Hold. Raise price target to $152 from $140.

Toni Sacconaghi, Bernstein: Follow their Tone, or Follow their Guidance? Apple’s FY Q4 results were in-line to better than expectations… Most importantly, AAPL’s guidance for FY Q1 (December quarter) was largely in line with consensus – In fact, Apple’s guided sequential revenue and EPS increase for FY Q1 is the highest in any September or October iPhone launch. We – and many others – had feared that guidance could be weaker, reflecting only 9 weeks of the flagship iPhone X and limitations on supply… Somewhat surprisingly, Apple executives were coy in discussing iPhone 8 and X demand and executives’ tone appeared less ebullient than on previous FY Q4 earnings calls. The key question is whether this reflects any potential softness in demand, or prudence in not proclaiming a strong cycle after 6 days of visibility. We believe it is the latter. Maintain Outperform. Raise price target to $195 from $175.

Stephen Turner, Hilliard Lyons:  Global sales were strong across all geographies. The Americas region, Apple’s largest region, represented 44% of total revenue with sales increasing 14% y/y to $23 billion, the fastest growth rate in 2 years. European revenue of $13 billion increased 20% from a year ago. Greater China region sales increased 12% y/y to $9.8 billion, its first y/y expansion since FQ1’16. Japan sales declined 11% y/y to $3.8 billion on a difficult comparison to the year ago quarter. Asia Pacific sales increased 5% to $2.8 billion. In general, global sales broadly improved from a year ago. Maintain Long Term Buy. Raise price target to $192 from $182. 

Neil Cybart, Above Avalon: Major Themes. Apple reported iPad unit and revenue growth in every geographic segment. More impressively, Apple saw iPad unit sales up 25% year-over-year in China and up 39% in India… I continue to think the iPad’s turn around is one of the major Apple stories of 2017. According to many pundits, the iPad was a product category left for dead. Instead, we have growing evidence that the combination of declining iPad mini sales and a longer upgrade cycle were the factors that served as major headwinds to iPad sales growth. With both of those variables dissipating, iPad sales growth will be much easier to achieve in the coming quarters.

Mark Moskowitz, Barclays: Good but Not Great as Big Questions Go Unanswered. The bulls are likely to cheer the better Dec-Q guide, strong services number, and the rebound in China as placeholders for only better trend-lines in 1H C2018. In our view, three big questions were not addressed: 1) Why doesn’t Apple disclose a pre-order IPX units number? 2) Are IPX wait times due to really strong demand or bigger-than-usual supply challenges? 3) Will price elasticity be in effect after the early adopters fade in coming quarters? While we think the three big questions are important to many investors, there likely won’t be any company commentary or market data to shed light on the topics until 1H C2018. In the interim, the bulls can outpunch the bears as consensus numbers are not getting cut, and there is little the bears can present to dismantle the bulls’ view that the IPX mega cycle might just start a couple quarters later due to production challenges. Perform. No price target.

Tavis McCourt, Raymond James: Demand Accelerating Across All Products. Apple exceeded our September quarter estimates and guided well above our expectations (but in line with consensus.) Most importantly, if one looks at sell-through trends, Apple sales growth has improved in Mac, iPad, iPhone, wearables and services as this year has progressed. September exceeded expectations despite fewer iPhones in channel inventory y/y and a meaningful bump in ending inventory on the balance sheet. Guidance was reassuring given the concerns around iPhone X supply, and we believe it is consistent with ~25 million X and overall units flat to slightly up. Outperform. Raise price target to $185 from $180.

Amit Daryanani, RBC: I Don’t Know How, Don’t Know When, but It Should Be Great. AAPL reported an impressive beat and raise driven by steady iPhone demand post launch, impressive rebound in China revenues and acceleration in services revenues. More importantly, AAPL provided a better-than-expected Dec-qtr guide that shows iPhone momentum should sustain into Dec-qtr and potentially beyond. Outperform. Raise price target to $190 from $180. 

Walter Piecyk, BTIG: Apple Now A Double-Digit Grower. Double digit revenue growth is an important hurdle for growth investors, and is typically rewarded with a higher valuation multiple. Apple’s quality of revenue is also increasing. Its mix of revenue is shifting to higher margin and more predictable service revenue. Record high customer retention rates on the iPhone and the ability to grow iPhone revenue when upgrade rates are at record low levels argue strongly for viewing the iPhone as a recurring revenue business until someone can unseat Apples dominance in the high-end smartphone market. Buy. Raise price target to $198 from $184.

Tim Long, BMO: Impressive Performance Despite Staggered Launch. Apple reported strong September quarter results, though all eyes were on the December revenue guide. Management did not disappoint, with the high end of the range well above our/consensus estimates. We expect volumes to remain constrained into at least the March quarter, but our outlook for the full year remains positive, with volumes of 247M, up 14%. Services and other products had an impressive showing, in our view, and we expect the momentum to remain strong. Outperform. Raise price target to $195 from $180.

Michael Olson, Piper Jaffray: Outlook Better Than Feared. Apple reported EPS ahead of the Street, with Dec. qtr revenue guidance in-line with consensus. For the Sept. qtr, EPS was above consensus by 11%, while revenue beat by 4%… The outlook implies that fears of either supply (inventory constraints) or demand (lofty ASP) issues for iPhone X may have been overblown. Overweight. $200. 

Gene Munster, Loup Ventures: Strength Across the Board, and iPhone X Hasn’t Even Started. Tim Cook is giddy, and he should be. This was the first time since Dec-14 that Apple had growth in every product and every geography. Apple’s results for Sep-17 were generally as expected with two bright spots. First, Services growth was up 24%, an acceleration from 22% in Jun-17 and above Street expectations of 17%. Second, mainland China grew 12% year-over-year. The guidance for Dec-17 provided the substance of tonight’s surprise, with the midpoint of Dec-17 revenue 1% higher than the Street, and gross margins 25 bps above the Street (a rarity in a cycle change quarter).

Robert Cihra, Guggenheim: Strong Qtr with CY18E Still the Main Event. It guided Dec-qtr revs $84-87B, which a) we think is still conservative and b) at the mid-point would be +63%Q/Q vs. its 5yr avg +59%Q/Q and so signals new high-end iPhone X production constraints are not holding it back. Moreover, gross margin guide for 38-38.5% implies no iPhone X ramp penalties. Buy. Raise price target to $215 from $200.

Daniel Ives, GBH Insights: Trillion Dollar Market Cap Could Finally Be on the Near-Term Horizon. In a nutshell we would characterize these as “blow out” results, which were a positive surprise with most investors expecting a ho-hum quarter but nothing spectacular as the build-up for iPhone X begins and iPhone 8/8+ sales appeared soft of the gates. Highly Attractive. Raise price target to $205. 

Bill Maurer, Seeking Alpha: New High After Blowout. During the fiscal 2017 year, the company was able to reduce its outstanding share count by 210 million shares to 5.126 billion. That number is likely to head even lower if Apple can repatriate foreign funds at a low rate, one of the main reasons why [Sen. Elizabeth Warren] says that the new tax plan is a $2 trillion handout to big corporations. $200.

Andrew Uerkwitz, Credit Suisse. Greater China and Mac Delivered Upside Surprise. Apple delivers time and again respectable and better than expected growth across its products despite its commanding size. However, we remain skeptics of its long-term growth and ecosystem strength due to increasingly entrenched Chinese OEMs and competitors that focus on device independent software and services. Perform. No price target. 

Abhey Lamba, Mizuho: Stay Neutral. Apple reported results above expectations as iPhone shipments printed largely in-line with estimates. The company guided DecQ in-line with consensus which was likely better than feared (given ongoing reports of production ramp issues). We continue to think risk/reward on the stock is balanced at current levels given the uncertain supply/demand dynamic as well as potential for consumption delays as customers anticipate the next product cycle at lower price points. Neutral. $160. 

5 Comments

  1. David Emery said:
    If I did the math right, $196 is the share price for a $1 trillion valuation. Looks like most of the above predict Apple will make that figure within the year.

    Lamba, though, seems to ignore anything that isn’t an iPhone. That $160 price is already well under-water before the market starts today. ($173 pre-market this morning.)

    1
    November 3, 2017
  2. Gianfranco Pedron said:
    Wait, wait … what?

    Haven’t analysts, some of whom are quoted above, been telling us for the past half decade or so that Apple was facing impending doom because of market saturation, lack of innovation post Jobs, one trick pony and the need for a market disrupting product like a TV set (really?)?

    Looks like Apple, without much fanfare, flicked the puck into the crowd while everybody was busy catching up on each other’s posts on Facebook, Twitter, Yahoo Finance, etc. Nobody noticed that the game had changed until the crowd cheered, yet again.

    Come on guys, if you’re going to comment on the game, pay attention or stay home!

    2
    November 3, 2017
    • Fred Stein said:
      Good points on innovation. To get an idea of how naive these naysayers are, disruptions are never the obvious ones, like a big screen TV or a car (post Tesla). In tech the next big thing is often “little”, physically smaller platforms. The Watch and AirPod are the early iterations, where Apple leverages their iOS and ARM investments.

      2
      November 3, 2017
  3. David Sauceda said:
    Link: https://en.m.wikipedia.org/wiki/List_of_largest_corporate_profits_and_losses

    Although the link above is not updated to reflect Apple’s latest annual earnings, according to Apple’s recently recorded 10-K, 2017 ($48.35B) officially marks the second highest total “reoccurring” annual earnings by a company of all-time, next only to Apple’s 2015 ($53.4B) performance.

    With excellent margins and providing a next quarter guidance range between $84B to $87B, it may be safe to assume Apple’s first quarter results will be the highest recorded/reported quarterly earnings ever! And if that becomes fact, another safe assumption would be that Apple’s 2018 total earnings will land the company at the tippity top of the Annual [reoccuring] Earnings Board.

    For me it’s difficult imagining any (momentum moving) company generating this much reoccuring cash with not a single yield or stop sign in sight.

    2017 10-K link: http://files.shareholder.com/downloads/AAPL/5499340205x0x962680/D18FAEFF-460A-4168-993D-A60CBA8ED209/_10-K_2017_As-Filed_.pdf

    0
    November 4, 2017

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