Wall Street impressed by Apple's surprise second quarter, analysts see stock headed to new highs

Posted:
in AAPL Investors edited April 2014
Apple's second-quarter earnings report was packed with surprises that delighted investors on Wall Street, prompting some analysts to respond by raising their price targets for the iPhone maker's stock.

Apple


Apple beat expectations by earning $10.2 billion in quarterly net profit, driven by record sales of 43.7 million iPhones. And the company went even further by announcing a 7-for-one stock split, increased quarterly dividend, and an expanded share buyback program.

Analyst reactions were positive, and some on Wall Street increased their projected price targets for AAPL stock. A roundup of their takes follows.

RBC Capital Markets

"Buy before Tim (Cook) does it himself," quipped analyst Amit Daryanani, referring to Apple's larger $90 billion stock buyback program running through December of 2015. RBC has increased its AAPL price target from $590 to $625.
Price target increases were issued Thursday by RBC, Cowen, Evercore, and Canaccord.
Daryanani is pleased with Apple's expanded capital allocation policy, which will see $90 billion in buybacks and $40 billion paid out in quarterly dividends. Apple's new dividend is $3.29 per share, and the company has signaled that it will likely be increased on an annual basis heading forward.

The analyst is also excited about Apple's commitment to entering "new product categories" in the second half of this year. RBC Capital Markets has assigned an "outperform" rating to AAPL stock and recommends that investors buy in.

Cowen and Company

Also increasing his target on Thursday was analyst Timothy Acuri, who has a new projected price of $630 for shares of AAPL. He expressed encouragement that the iPhone is once again growing in double-digit percentages, while Apple's outlook for the current June quarter was also better than the market expected.

Acuri expects even bigger gains from the iPhone later this year, when he suspects Apple will launch a new model witha larger display. He's also hopeful that Apple will launch a larger iPad model this year.


The New York Stock Exchange, credit Carlos Delgado via Wikipedia.


Evercore Partners

Rob Cihra also opted to increase his price target on Apple by $30 to $700 on Thursday. He cited international expansion of the iPhone, which has been a key driver for Apple as it continues to experience growth in its smartphone lineup.

Like his colleagues, Cihra his especially hopeful for this year's anticipated "iPhone 6" rollout, which he suspects will feature "particularly strong upgrades." He too believes Apple will draw in new customers with a larger display.

Canaccord Genuity

Michael Walkley's newly increased price target of $610 reflects what he sees as a "strong base with greater channel reach" ahead of the second half of calendar 2014. In particular, he sees new iPhone models with larger displays driving a "stronger than normal upgrade cycle among Apple's loyal and growing customer base."

The 43.7 million iPhone units shipped by Apple exceeded Walkley's own forecast of 38.3 million units. And the company's June quarter guidance also implies iPhone sales above his estimates, Walkley said.

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Morgan Stanley

Analyst Katy Huberty has been bullish on Apple for some time, telling investors that history suggests now is the time to buy in to the company's stock. She noted earlier this month that Apple stock tends to improve after periods of growth in research in development, as the company invests heavily in new product categories.

Specifically, Apple's R&D investment spiked ahead of the launches of the iPod in 2000 and 2001, before the iPhone in 2005, and ahead of the iPad in 2008 and 2009.

Huberty also believes that institutional ownership of AAPL stock is too low. And with a better-than-expected June quarter, that may start to change.

J.P. Morgan

Analyst Rod Hall reiterated his "overweight" rating for AAPL stock on Thursday, coming away impressed with strong iPhone sales and improving gross margins. He also believes that Apple's 7-for-1 stock split could make the company more eligible for inclusion in the price-weighted Dow with about a 3 percent rating.

Hall remains hopeful that Apple will launch a wrist-worn "iWatch" later this year, and continues to predict that Apple will introduce a new converged laptop-tablet hybrid that could target the sub-$1,000 laptop market.




Needham

It's an "iPhone story" for Apple, analyst Charlie Wolf said Thursday. That's because of the device's out-sized revenues and gross profits, which dominate everything else in the company's lineup.

Wolf had the highest iPhone sales projection among major investors on Wall Street -- 42.5 million --?and Apple even managed to beat that forecast in the March quarter, hitting 43.8 million iPhones in the three-month period.

Wolf said he's encouraged that Apple's upside surprise stemmed from sales of the iPhone in emerging markets, including China, India, and Brazil.

Piper Jaffray

Analyst Gene Munster has maintained his "overweight" rating for AAPL stock with a price target of $640. The strength of Apple's March quarter has encouraged him, as Munster has previously expressed concern that it and the current June quarter could be "difficult periods" for the company.

Munster said Apple's March quarter results are a sign that investors should own AAPL shares outside of a new product cycle from the company. He cited the company's high single digit revenue growth, along with its "consistent track record of returning cash to investors."

Like many of his colleagues, Munster highlighted iPhone growth in emerging markets, with sales up 28 percent in China, 61 percent in Brazil, 97 percent in Russia, 56 percent in Turkey, and 55 percent in India. Overall iPhone unit growth was up 17 percent year over year, an increase from the 7 percent growth Apple saw in the December quarter.

Smart Cover


Cantor Fitzgerald

Analyst Brian White has maintained one of the highest price targets for shares of AAPL, at $777. He is increasingly confident in that projection with a new Apple product cycle looming in the second half of 2014.

The company's latest results should "silence iPhone naysayers," White said, with sales of nearly 44 million handsets "crushing" market expectations. White's own projections called for Apple to have shipped 36 million units, or almost 8 million less than Apple did ship.

Though Apple's March quarter was impressive, White believes anticipation for new products from the company later this year will prove more important than this week's financial results. He's hopeful that Apple's expansion into new product categories will include a so-called "iWatch."

UBS

Apple's March quarter came in "far better" than analyst Steven Milunovich expected, while the company's outlook for its June quarter is "not as weak" as he had feared.

"It appears there is more life in the iPhone opportunity than recognized," he conceded. Milunovich has maintained his "buy" rating with a price target of $625.

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Wells Fargo

While others saw fit to increase their price targets on Apple, analyst Maynard Um has maintained his neutral "market perform" rating on the company's shares. Still, he told investors on Thursday that there was "plenty of good news" in Apple's March quarter, including iPhone upside, better gross margins, a larger dividend, the stock split, and an increased share buyback program.

On those positives, Um did slightly raise his "valuation range" on AAPL to between $515 and $585, both $10 higher than his previous numbers. With a $45 spike in premarket trading, shares of AAPL are already on the high end of that range, at around $570 as of Thursday morning.

Um remains concerned that gross margin will come under pressure later this year, when Apple is expected to launch a redesigned "iPhone 6." He also sees a limited amount of incremental market cap opportunity in existing product segments.

"We believe Apple will eventually approach a fork in the road where it needs to choose between ASP/margin or units, as both, in our opinion, will be difficult to maintain," he wrote.
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Comments

  • Reply 1 of 107
    Well., as long as the plantation owners are happy.
  • Reply 2 of 107
    MacProMacPro Posts: 17,567member
    I'm hoping for $1000 ... and I mean after the stock split ... :D
  • Reply 3 of 107
    rogifanrogifan Posts: 10,669member
    Will be interesting to see where Apple ends up today. Facebook pre-market was up 3% but is down right now. Apple was up around $45 but pulled back to $38.
  • Reply 4 of 107
    rayzrayz Posts: 814member

    What is the point of these people?

     

    Masters of hindsight.

  • Reply 5 of 107
    SpamSandwichSpamSandwich Posts: 29,880member
    rayz wrote: »
    What is the point of these people?

    Masters of hindsight.

    And really not even very skilled at the hindsight part. They're worse than a hall of mirrors.
  • Reply 6 of 107
    adrayvenadrayven Posts: 460member
    Maynard Um, "We believe Apple will eventually approach a fork in the road where it needs to choose between ASP/margin or units, as both, in our opinion, will be difficult to maintain," he wrote.

    Um.... lol, Apple is ASP/Margin for Years... whats to decide? they've always gone for quality/margin over 'units' sold.. this isn't new.. he's talking like they are on the fence about this..
  • Reply 7 of 107

    ... and here comes the pump.

  • Reply 8 of 107
    irelandireland Posts: 17,414member

    Of course they do. Until they see Apple headed to new lows that is.

  • Reply 9 of 107
    solipsismxsolipsismx Posts: 19,566member
    1) It sure puts a damper on those "Tim should be fired" people.

    2) I honestly wonder how [@]Constable Odo[/@] is going to spin this into negative news.
  • Reply 10 of 107
    rob53rob53 Posts: 1,912member

    AAPL is being heavily traded this morning with big spikes of transactions. I'm sure the short investors are bailing as fast as they can, which could be why the stock is dropping from its overnight high. Of course the DOW and NASDAQ are dropping this morning as well, pulling AAPL down in the process. 

  • Reply 11 of 107
    rogifanrogifan Posts: 10,669member
    It was interesting on the call yesterday that iPad was one of the last things Cook talked about in his prepared remarks. When is the last call where Apple has talked about the Mac before iPad? I can't remember. I'm curious to see what Apple has up it's sleeve to move iPad forward.
  • Reply 12 of 107
    apple ][apple ][ Posts: 8,360member

    Just yesterday, before earnings, I remember reading on this forum that AAPL wouldn't hit 600 ever again! Is it possible to be more wrong?<img class=" src="http://forums-files.appleinsider.com/images/smilies//lol.gif" />

     

    Originally Posted by mvigod View Post

    If you buy the stock do it for the safe 2.3% dividend but don't expect any moves near 600/share ever again.  

  • Reply 13 of 107
    lkrupplkrupp Posts: 6,393member

    “Wall Street impressed by Apple's surprise second quarter, analysts see stock headed to new highs"

     

    Translated that means the Street’s understanding of the mobile market is completely wrong. The Street has been clamoring for cheaper devices with bigger screens as the only way Apple can survive. Now comes this “surprise” that seems to go against all their understanding of how this market works. It would appear Time Cook actually knows what he is doing. Wall Street not so much.

  • Reply 14 of 107
    lkrupplkrupp Posts: 6,393member
    Quote:

    Originally Posted by Apple ][ View Post

     

    Just yesterday, before earnings, I remember reading on this forum that AAPL wouldn't hit 600 ever again! Is it possible to be more wrong?<img class=" src="http://forums-files.appleinsider.com/images/smilies//lol.gif" />

     

    Originally Posted by mvigod View Post

    If you buy the stock do it for the safe 2.3% dividend but don't expect any moves near 600/share ever again.  


     

    The Internet is packed full of experts absolutely confident in their prognostications. And if you read it here on AI it must be true.

  • Reply 15 of 107
    lkrupplkrupp Posts: 6,393member
    Quote:

    Originally Posted by sog35 View Post

     

    One day too late you analysis trolls.

     

    Sure would help if they said this yesterday.

     

    Anyway I don't listen to analysis and I held on to my 250 shares and did not sell when they were proclaiming doom last year.


     

    And as of this morning Apple is worth more than half a trillion dollars again. 

  • Reply 16 of 107
    zoetmbzoetmb Posts: 2,329member
    I'm surprised they're all so satisfied. Usually, Apple out-performs their expectations, but then they claim that Apple won't repeat that in the upcoming quarter and these stock price goes down anyway.

    I have no complaints...I've held the stock so today is a good day.
  • Reply 17 of 107
    mpantonempantone Posts: 1,343member
    Quote:
    Originally Posted by lkrupp View Post

     

    The Internet is packed full of experts absolutely confident in their prognostications. And if you read it here on AI it must be true.


    Yes, and especially if it's about investing.

     

    :p 

  • Reply 18 of 107
    Quote:

    Originally Posted by SolipsismX View Post



    1) It sure puts a damper on those "Tim should be fired" people.



    2) I honestly wonder how @Constable Odo is going to spin this into negative news.

     

    1. I'm not in that camp but I had questions, still do. I would imagine that those questions will be answered this fall.

     

    2. I would imagine that, even though revenue and iPhone units sold, are above previous quarters, profit is still below that of the same quarter in 2012. Not that I'm complaining. Just saying...

  • Reply 19 of 107
    Quote:

    Originally Posted by Apple ][ View Post

     

    Just yesterday, before earnings, I remember reading on this forum that AAPL wouldn't hit 600 ever again! Is it possible to be more wrong?<img class=" src="http://forums-files.appleinsider.com/images/smilies//lol.gif" />

     

    Originally Posted by mvigod View Post

    If you buy the stock do it for the safe 2.3% dividend but don't expect any moves near 600/share ever again.  


     

    Do you expect AAPL to hit $600 in the near future?

  • Reply 20 of 107
    apple ][apple ][ Posts: 8,360member
    Quote:

    Originally Posted by lkrupp View Post

     

    The Internet is packed full of experts absolutely confident in their prognostications. And if you read it here on AI it must be true.


     

    I wish there was a forum where there would be a poll before every major announcement and event, and also for every rumor.

     

    People would have to vote, and every member would have reputation points that was based on their voting history. If somebody was always wrong, their reputation would be terrible, and it would be visible for all to see every time that they posted, because it would be right next to their name. And, on the flip side, if somebody was almost always right, their stellar reputation would also be visible for all to see. Unlike other forums that have reputations, this reputation would not be decided by other users. It wouldn't be a popularity contest. Each user's reputation would be their own sole responsibility, based on their wisdom.

     

    I wouldn't mind seeing something like that.

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