Wall Street blown away by Apple's 'remarkable' record September quarter

Posted:
in AAPL Investors edited October 2014
Apple exceeded market expectations this week with the results of its record breaking September quarter, leading analysts to heap praise on the company and raise their price targets as it heads into what is expected to be a blockbuster holiday season.


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

Macquarie Securities

"Apple remains remarkable," analyst Ben Schachter concluded after the company reported earnings on Monday. In particular, he noted that Apple expects to continue facing overwhelming demand even as it's on track to exceed sales of 100 million iPhones in just six months.

Schachter also highlighted Apple's strength in software and services, noting that application sales are Apple's fastest growing and highest margin business. Sales were up 36 percent year over year, and the analyst believes that apps and other services will continue to become an increasingly important part of Apple's business.
Following its September quarter results, Apple saw price target increases from Macquarie Securities, Canaccord Genuity, BMO Capital Markets, RBC Capital Markets, and Wells Fargo Securities.
While most applications sold now are games, Schachter sees potential for growth in enterprise, health care, home automation, automotive, and more.

Accordingly, Macquarie Securities raised its price target on AAPL stock this week to $118, and has maintained its "outperform" rating.

Evercore

Apple's growth is "bigger than just a cycle," analyst Rob Cihra believes. Sales of 39 million iPhones were in line with his predictions ahead of the report, but were about 2 million more than the market at large expected.

Looking forward to the December quarter, Cihra predicts that Apple will sell a massive 65 million iPhones, which would represent a 27 percent year over year increase and achieve a new all-time quarterly record for the company.

The analyst noted that it's particularly impressive that Apple is sustaining such growth with a premium-priced product with average selling price at or above $600. In contrast, the broader smartphone market is only seeing growth among ultra-low-end models.


Morgan Stanley

The iPhone 6 product cycle will be "stronger for longer," analyst Katy Huberty believes. She said her channel checks suggest that early supply constraints have been largely addressed, but with Apple set to expand to more than 115 countries by the end of December, she sees a need for Apple to build its channel inventory through March, resulting in better than normal seasonality for the iPhone.

"What's more, consensus estimates only assume half of all the 250 million iPhone 4s and older devices still in use will be upgraded this year, leaving considerable pent-up demand in (fiscal year 2016)," Huberty wrote. "If Apple Pay or Apple Watch gain traction, we see further iPhone upgrade potential in FY15 and FY16."

Piper Jaffray

Starting this quarter, Apple plans to expand iPhone and iPad channel inventory to 5 to 7 weeks, addressing needs in emerging markets. Analyst Gene Munster expects this will help boost shipments not only in the current quarter, but also heading into the March quarter.

"Overall, we believe this could add about $2.8 billion in revenue to March or about 5% excluding our estimate for the channel benefit," Munster said.

Munster continues to believe that shares of AAPL can reach $120 on strength of the iPhone 6. He also believes that Apple Pay will drive both iPhone 6 and Apple Watch sales by focusing on the consumer experience.


Cowen and Company

In addition to Apple's desire to grow channel inventory, Apple's ongoing supply constraints imply a tailwind for the first half of 2015, in the eyes of analyst Timothy Arcuri. He was also encouraged by Apple executives' bullish commentary on sell-through in China.

In addition, Arcuri said Apple Pay and the new Apple Watch will "create new angles to the narrative and allow investors to 'dream' again" on how high sales might go.

The analyst also expects Apple to provide another "meaningful step-up" to its capital return program in the spring, as it has done in years past. Cowen and Company has maintained its "outperform" rating with a price target of $113.

Canaccord Genuity

Like others, analyst Michael Walkley was encouraged by the strong guidance Apple provided for its December quarter. The company has forecast revenue between $63.5 billion and $66.5 billion, and gross margins between 37.5 percent and 38.5 percent.

As a result, Walkley increased his price target for shares of AAPL to $120, and reiterated his "buy" rating.

"We maintain our expectations for a record iPhone 6 upgrade cycle, driven by strong replacement sales to existing iPhone customers and strong high-end smartphone market share gains, due to our surveys indicating a greater mix of Android smartphone consumers switching to the iPhone 6 smartphones than during the iPhone 5 series launches," Walkley wrote.

Apple

RBC Capital Markets

Apple has seen gross margins at or above the high-end of its guidance for six quarters in a row, and analyst Amit Daryanani believes that trend could continue in the December quarter, surprising investors on the upside.

Daryanani did acknowledged that disappointing iPad sales were the one "blemish" on Apple's otherwise outstanding quarter. But he expects the company to see a cyclical bounce after the debut of the new iPad Air 2 and iPad mini 3, set to ship this week.

RBC has raised its price target on AAPL to $115, and maintained its "outperform" rating.

UBS

Apple is in the midst of a "mega-cycle," analyst Steven Milunovich believes. Over time, he expects money invested in technology companies will continue to migrate toward Apple, as so-called "legacy vendors" continue to struggle.

He expects the company to achieve 14 percent revenue growth in the current December quarter, and 20 percent growth in fiscal 2015. UBS has maintained its price target of $115 with a "buy" rating.


BMO Capital Markets

Joining others in raising their targets, analyst Keith Bachman now sees shares of Apple reaching $113. He now sees the company potentially selling as many as 70 million iPhones in the December quarter.

Bachman also projects gross margins of 39.5 percent in the March quarter, and believes that Apple Watch sales could reach 22 million units in calendar 2015.

Wells Fargo Securities

One analyst who wasn't swayed by Apple's record quarter, however, was Maynard Um of Wells Fargo Securities, who has maintained his "market perform" rating. Um did acknowledge that Apple "delivered a very strong outlook and quarter."

The analyst attributed Apple's strength to increased demand, and believes the positive guidance is as a result of new carriers to be added in the December quarter, most notably China Mobile's launch of the iPhone 6 and iPhone 6 Plus.

Still, Um cited disappointing iPad shipments and lower average selling prices of the iPad and Mac lineups. He also cautioned that product transition costs could be a margin headwind, and believes Apple's increased channel inventory policy is a negative.

Wells Fargo slightly increased its "valuation range" for AAPL stock to between $92 and $102. But as of Tuesday morning trading, shares of AAPL were already above $102.
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Comments

  • Reply 1 of 37
    apple ][apple ][ Posts: 9,233member

    Tell me about it!

     

    As soon as I heard the results yesterday, I picked up some more in after hours. It was so obvious that it was going to gap up this morning, and it did!

  • Reply 2 of 37
    MacProMacPro Posts: 19,380member
    Wells Fargo ... Ha! Ever since they took over our bank, First Union here in Florida we have had nothing but screw ups and errors.
  • Reply 3 of 37
    Originally Posted by AppleInsider View Post

    The iPhone 6 product cycle will be "stronger for longer," analyst Katy Huberty believes. She said her channel checks suggest that early supply constraints have been largely addressed...

     

    Yeah, uh huh, I'm sure you know better than Apple who just explicitly said otherwise.

  • Reply 4 of 37
    rogifanrogifan Posts: 10,669member
    So that's why the stock is only up ~2-2.5% when the broader markets are up big this morning? If Amazon, Google or Microsoft had a quarter this good their stock would be up 5% or more. Apple had a blow out quarter AND very bullish guidance for the next quarter and the stock is just "meh" today.
  • Reply 5 of 37
    paul94544paul94544 Posts: 1,027member
    I already predicted this 3 months ago and share price will trade in a range from 100 up to round about 112 until next results and then after that probable range will be 115 to 130 for rest of the 2015 maybe more depending on results and Apple Watch takeup
  • Reply 6 of 37
    bugsnwbugsnw Posts: 717member

    I'm always mystified about wall street comments to the effect of being surprised that Apple is able to sell such expensive items, all the while enjoying explosive growth.

     

    The iPhone is one of the rare opportunities where just about everybody can buy the premier, world-class product enjoyed by the rich.

     

    How much does it take to join this rarefied club? Under $1,000.

     

    Cars, TVs, Homes, Jewelry, Watches, Clothing....the best of the best in these categories will drain even the fattest wallets.

  • Reply 7 of 37
    paul94544paul94544 Posts: 1,027member
    Quote:
    Originally Posted by Rogifan View Post



    So that's why the stock is only up ~2-2.5% when the broader markets are up big this morning? If Amazon, Google or Microsoft had a quarter this good their stock would be up 5% or more. Apple had a blow out quarter AND very bullish guidance for the next quarter and the stock is just "meh" today.

    Because you don't understand how a share trades. Also the day hasn't ended. There is only a certain amount of cash on the sidelines and it takes  heck of a lot of it to move Apple just $1. Do you understand what balancing a portfolio is too?

  • Reply 8 of 37
    lkrupplkrupp Posts: 9,455member

    Screw all these bastards. They are complete ass-hats who deserve no attention whatsoever. So what if they now praise Apple. Tomorrow they do just the opposite as they always have. Make no mistake, this is ALL about money and stock manipulation to them. So far Tim and Co. have resisted these douche bags who want instant profits at the expense of the future of the company. 

  • Reply 9 of 37
    Wells Fargo ... Ha! Ever since they took over our bank, First Union here in Florida we have had nothing but screw ups and errors.

    Damn you're just gonna forget about Wachovia ??
  • Reply 10 of 37
    solipsismxsolipsismx Posts: 19,566member
    apple ][ wrote: »
    Tell me about it!

    As soon as I heard the results yesterday, I picked up some more in after hours. It was so obvious that it was going to gap up this morning, and it did!

    How can you buy and sell after hours?

    Yeah, uh huh, I'm sure you know better than Apple who just explicitly said otherwise.

    This site would indicate that Apple is still very constrained in the US.
  • Reply 11 of 37
    apple ][apple ][ Posts: 9,233member
    Quote:

    Originally Posted by SolipsismX View Post



    How can you buy and sell after hours?

     

    I guess it depends on who you use for your brokerage firm.

     

    I'm on scottrade.

     

    I can trade from 6 AM to 8 PM EST.

     

    You just go to your account and enter in the order, but you do have to specify that it's a premarket/aftermarket order that you are placing.

     

    Limit orders only.

  • Reply 12 of 37
    MacProMacPro Posts: 19,380member
    justp1ayin wrote: »
    Damn you're just gonna forget about Wachovia ??


    Haha ... I did didn't I. We started with Barnett when we moved here in 1992 so i have lost track! Barnett / First Union / Wachovia now Wells Fargo ... All were OK BUT ... once WF took over it was more like WTF! They changed all our self administered trading accounts on take over of Wachovia (of which we had four) and turned them into Wells Trade run accounts, charged fees us and spent years finding ways to not release them back to us. The annoying thing is they are all 100% AAPL for which we never required their 'expert' advice on. Our more diverse portfolio is elsewhere, these were just IRAs and grand kid education accounts. You would not believe the number of meetings and various managers and personal bankers we've been through none of whom ever sorted the simple task of undoing their own error. In fact they managed to create additional accounts! No sight of fee refunds charged during these past years on accounts they literally hi-jacked. /rant

    OK back to Apple :)
  • Reply 13 of 37
    jungmarkjungmark Posts: 6,866member
    Haha ... I did didn't I. We started with Barnett when we moved here in 1992 so i have lost track! Barnett / First Union / Wachovia now Wells Fargo ... All were OK BUT ... once WF took over it was more like WTF!

    Oh yeah, I went from Security to Meridian to Corestates to First Union to Wachovia to Wells Fargo in SJ. Then I closed my acct when they started charging $7 a month but not until I realized it a year later.

    Interesting to note the Corestates Center changed to the First Union Center.
  • Reply 14 of 37
    rogifanrogifan Posts: 10,669member
    paul94544 wrote: »
    Because you don't understand how a share trades. Also the day hasn't ended. There is only a certain amount of cash on the sidelines and it takes  heck of a lot of it to move Apple just $1. Do you understand what balancing a portfolio is too?

    No I understand that Apple is undervalued. Heck even on CNBC's Squawk Box this morning Joe Kernan why Apple wasn't up more pre-market based on what they reported. And no it doesn't take a heck of a lot to move Apple $1. We've seen big sell offs in prior quarters when results were good but not blow away.
  • Reply 15 of 37
    jungmarkjungmark Posts: 6,866member
  • Reply 16 of 37
    rogifanrogifan Posts: 10,669member
    sog35 wrote: »
    Apple is like a huge tanker.  It takes along time for it to move up since its so HUGE.  $600B market cap.

    Plus the option sellers are trying really hard to keep the price down so they don't need to pay huge $$.

    That's why you don't TRADE Apple.  You own APPLE.  Buy and hold. 

    IMO we see $110 in the next 30 days.
    IMO we see $120 in the next 120 days.

    holding 500 shares common and $2k in options.

    Somebody's keeping the stock down and it stinks. Believe me if this was a meh to bad quarter the stock would be down more than 2%. With the market doing so well today (heck my company's stock is up almost 2%) Apple should be up more than it is.
  • Reply 17 of 37
    nick29nick29 Posts: 111member
    I like the term "ultra-low-end"
  • Reply 18 of 37
    Quote:

    Originally Posted by Rogifan View Post



    So that's why the stock is only up ~2-2.5% when the broader markets are up big this morning? If Amazon, Google or Microsoft had a quarter this good their stock would be up 5% or more. Apple had a blow out quarter AND very bullish guidance for the next quarter and the stock is just "meh" today.



    Think of it this way... 

     

    Apple is up 6 DELL's today.

     

    2 and 1/2 BlackBerry's

     

    A Best Buy

     

    Half a Intuit

    Half a Hilton

     

    just on 90 day data. Note most 'analysts' had them at 40B or higher. 

     

    going up 5% (30Billion in value) is a huge headwind when you're the LARGEST CAPPED COMPANY IN THE FREE (U.S.) WORLD!

     

    I'm hoping for a repeat of this period...

     

    Note a short peak on Q4 earnings report ... then a 30 day drop (shorters)... then a 'whoa' by the market in December... and up over 80% from that mini low.

     

     

    So... patience, grasshopper.

  • Reply 19 of 37

    The masters are happy! The masters are happy!

  • Reply 20 of 37

    I meant to post this earlier, but here's a minute worth of money for various companies.

     

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