RBC’s bull case for Apple is intact, says Amit Daryanani.
From a note to clients that landed in my inbox Sunday:
We think AAPL ends-up printing upside to Dec-qtr (ahead of their guided range) and March-qtr guide, while tepid, will be nowhere near the noise/fear levels are suggesting. We think investors are ignoring ASP tailwinds that could more than offset concerns around units and enable an inline guide. Simplistically, AAPL’s EPS/FCF (and stock) should continue to work higher driven by a) higher iPhone ASP, b) Potential for gross-margin tailwinds (specially in H2) and c) Tax reform benefits. We are adjusting our models – by raising Dec-qtr estimates and lowering March-qtr to reflect our thinking that channel fill could have occurred sooner vs. our expectations. Net/Net: Our positive bias on AAPL remains intact and is driven by our expectation that AAPL could achieve $14+ EPS by FY19 and stock works its way to $200+ over the next 6-12 months driven by ASP’s enabling better revenues, F/X and Mix (services+memory) bolstering gross-margins and tax-reform coupled with buybacks enhancing their EPS profile.
Reiterates Outperform rating and $200 price target.
My take: This note places Daryanani squarely in the camp of the analysts who don’t buy the noise and fear surrounding Apple these last few weeks.