From a note to clients by analyst Abhey Lamba that landed in my inbox Thursday morning:
Apple reports results on Thursday, February 1 after market close. Heading into the print, iPhone ASP expectations seem very low; based on our conversations, we see potential unit/ASP upside driving results above consensus for F1Q. This could carry through to F2Q18, with expected guidance printing in-line with to modestly above consensus as well. We acknowledge fundamental trends as well as a potential repatriation-related premium; however, we think these dynamics are largely reflected in current valuation.
We expect total revenue of $89-91bn vs. guidance of $84-87bn and consensus of $86bn on potential iPhone ASP upside. Gross margins are likely to print toward the middle of guidance of 38.0-38.5%. Given revenue upside, we believe EPS could print around $3.95-4.05 vs. consensus of $3.80.
Maintain Neutral rating while raising price target to $175 from $160.
My take: A little late. Didn't the stock recently break $180?
Honestly, how do people justify paying $360 for $1 of Amazon’s net income when they can purchase $1 of Apple’s net income for only $18? If Amazon and Apple were bonds, Amazon bondholders would earn .27% while Apple bondholders earn 20 times more at 5.5%. Never mind that Apple is much safer with $300B in cash to pay the interest.
I don’t understand all these analysts’ mumbo-jumbo – isn’t that just a fancy way of saying Apple is way overvalued, EVEN if it hits the ball out of the park?
Some things investors are not remembering:
– December quarter last year had an extra week of sales.
– Hedging is reducing the impact of the weakening dollar in the short term.
– Buybacks hit about $10 B last quarter. I’m guessing buyback was at about $172/share, which means about 55-60 M shares removed from the float. That means share count is down to about 5.8 B.
– with an EPS up 16% (last year was $3.38 so EPS was about $3.92), total EPS for the last 4 quarters comes in at about (2.1+1.67+2.07+3.92=) $9.76. At today’s close of $167.78, that’s an “effective” P/E of (167.78/9.76=) 17.19. P/E compression by growing EPS is alive, well, and not being taken into account.
– Apple’s RPS ends up at (88.3+52.58+45.41+52.9/5.8=) $41.24/share and AAPL P/R thus equals [price after hours is well over $172/share] equals (172/41.24=) *4.17*. By comparison, Amazon’s RPS equals ((60.45+43.774+37.955+35.714)/0.481.87=) $369.26/share and AMZN P/R [price after hours is well over $1,400/share] equals (1,400/369.26=) *3.79*. Microsoft’s RPS equals ((28.92+24.54+23.32+22.09=)/7.7=) $12.84/share and MSFT P/R [price after hours is about $94.26/share] equals (94.26/12.84=) *7.34*. Bottom line: At the present prices, AAPL’s RPS is nearly equal to AMZN’s and far superior to MSFT’s.
https://www.apple.com/newsroom/pdfs/Q1_FY18_Consolidated_Financial_Statements.pdf