Wall Street raises targets as Apple wows with iPhone 8 launch quarter, hype grows for iPho...

Posted:
in AAPL Investors edited November 2017
With a better-than-expected iPhone 8 launch quarter, and a highly anticipated debut for the flagship iPhone X, investors on Wall Street are riding high on Apple stock, pushing shares into uncharted territory as analysts increase their forecasts to trillion-dollar market cap levels.




As of early Friday morning trading, shares of AAPL were up more than $6 to about $175, following a strong earnings report where the company saw revenue grow 12 percent to $52.6 billion. After markets opened, shares cooled off slightly, but remain higher after Apple's impressive September quarter.

Following the news, analysts offered their reactions with new, higher price targets, and AppleInsider offers a roundup of their thoughts.

RBC Capital Markets

Analyst Amit Daryanani raised his price target to $190 and maintained an "outperform" rating for shares of AAPL after the company's September quarter earnings. He declared the result an "impressive beat," and noted that Apple's guidance for its next fiscal quarter are even better than expected.

Daryanani sees Apple's iPhone X and higher memory options in the iPhone 8 lineup helping to drive average selling prices higher for this product cycle. He also believes Apple's gross margins will be helped by those shifts, as well as a growing services business.

His forecast calls for Apple to ship 80.6 million iPhone units in the December quarter, which would be a 3 percent year-over-year increase and a new record for the company.

iPhone X availability is expected to improve going into 2018 and the following March quarter, and Daryanani is encouraged that next year will get off to an even better start than Wall Street expects.


Guggenheim

Apple's 2018 calendar year remains the "main event" for analyst Robert Cihra, who increased his price target on AAPL to $215 and maintained a "buy" rating.

"We continue to see Apple setting up for its biggest iPhone up-cycle in 3 years, driven by pent-up demand + multi-year OLED rollout + meaningfully higher ASPs," Cihra wrote. "Double-digit unit growth times double-digit ASP increases drives our forecast for ongoing reacceleration."

He believes Apple's fiscal year 2018 will post revenue of $286 billion, far higher than Wall Street consensus of $266 billion.


Loup Ventures

"Tim Cook is giddy, and he should be," analyst Gene Munster wrote, noting that it's the first time since the December 2014 quarter that Apple saw growth in every product and every geography.

Munster highlighted Apple's services business, which grew 24 percent year over year, accelerating from the 22 percent growth it posted in the preceding June quarter. Services also exceeded Wall Street expectations of 17 percent growth.

Apple also returned to growth in China, where sales were up 12 percent year over year.

As for the iPhone X, Munster believes that Apple is in a position to exceed expectations with regards to supply and demand.

"We believe demand for the iPhone X will, over the next four quarters, play out to be slightly more favorable than increasingly optimistic analyst estimates," he said.


Macquarie Research

Analyst Ben Schachter also increased his target for AAPL to $188, and reiterated an "outperform" rating. He noted that despite growing in sales, the iPhone was not actually the standout product, as services, Mac, iPad and wearables all drove upside.

"This broad foundation, combined with the iPhone X, allowed the company to guide Dec. above expectation," Schachter wrote. "Apple is simply delivering across the board."

He said that Apple is currently dominating the high-end smartphone and associated services market. He's bullish on the iPhone X, calling it the most innovative iPhone in years, and seeing it drive the company's stock even higher.


GBH Insights

The possibility of a trillion-dollar market cap milestone -- long discussed with regards to Apple, but never actually becoming a reality -- could now be on the near-term horizon, analyst Daniel Ives told investors.

GBH has a valuation target for AAPL between $190 and $200, and rates the stock as "highly attractive."

Ive said that Apple's September quarter was a "blow out" result, and yet the three-month period is just "popcorn for the real feature movie in Cupertino:" the iPhone X launch and ramp up.

To him, as the iPhone X "super cycle" ramps up over the next year, it could push shares of AAPL to a trillion-dollar market cap.

With Friday morning's gains, Apple's market cap was at about $886 billion, giving the company still some distance to go before achieving that.
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Comments

  • Reply 1 of 25
    netmagenetmage Posts: 258member
    He believes Apple's fiscal year 2018 will post revenue of $286 billion, far higher than Wall Street consensus of $286 billion.
  • Reply 2 of 25
    BebeBebe Posts: 116member
    Good initial customers' reaction to the $1000+ iPhone X. Disappointment to those who said that the iPhone X would not sell because it is too expensive.  :D
    Rayz2016radarthekatwatto_cobrajony0
  • Reply 3 of 25
    Who bought Apple stock when it's down a few weeks ago is a genius.
    magman1979radarthekatwatto_cobrajony0
  • Reply 4 of 25
    zoetmbzoetmb Posts: 2,402member
    Gee...wasn't the word just about two weeks ago that Apple had cut back on parts orders for the iPhone 8, which the media and analysts were already claiming was a failure and Apple was going to do lousy because they were having production problems with the iPhone X and/or it was too expensive?   And hasn't the longer term story been that Apple doesn't innovate and is still a one-product company?

    It's amazing to me how the analysts are wrong just about every single time, then Apple surprises them and they're upbeat for a week or two and then they badmouth Apple again.    It would be almost be better if they were manipulating the stock for their benefit than if they're just simply wrong, because at least there's some rationality to the manipulation.   If they're not manipulating the stock, then they're just plain incompetent.  

    As I was surfing the dial last night, I saw a TV news report showing long lines at the Apple temporary store on Fifth Avenue (NYC) in the old FAO Schwartz building - all people camping out to try and obtain an iPhone X.   While I personally think this is quite silly, it's great for Apple.   People see that line and then they want the phone themselves.   Sometimes, shortages create demand.  Consumers always want what they can't easily have and it makes them feel superior if they can obtain one.   

    If the Home Pod turns out to be a big success and if the 4K Apple TV picks up steam, Apple is going to have an incredible 2018.   That $trillion valuation would be a 13% rise over the current price.   I think that's actually doable by the end of 2018, especially if Apple surprises us in 2018 with something new and unexpected.      



    magman1979radarthekatwatto_cobra
  • Reply 5 of 25
    FolioFolio Posts: 492member
    Bank America Merrill Lynch did not raise their $180 target, which they established back in May. Their analyst Wamsi Mohan raised revenue expectations after yesterday's call and surprise, but not so much the earnings. They only give AAPL a 15x multiple, which they note is high by its historical standards. Due to the range of iPhone's it's tougher to predict margins. Personally, I'm more bullish and believe Apple shouldn't be lumped in with Hewlett Packard as peer. Here is the most bearish excerpt of today's BAML report: "What the bears will fixate on Bears will point to (1) Lack of clarity on supply demand balance for iPhone X, (2) Lower iPhone ASP in the Sep quarter ($618 vs. consensus at $638) bringing into question price elasticity (3) GM guide for F1Q18 (38.25%, mid-point) is lower than consensus of 38.6% (calls into question overall margins for iPhone X), (4) Lack of quantification of pre-orders (5) Reversal of lead times for iPhone X overnight back to three to four weeks. "Where we shake out In our opinion, it is too early to call the demise of the iPhone X despite limited commentary on the earnings call as the first selling date is Nov 3rd. Investors will watch the sell through data and determine if the mix, margin trajectory can support an upside case of $12+ in C18 EPS based on higher ASP and margins. Our estimate of $11.91 assumes solid sell through and a material step up in the ASPs of the iPhone."
  • Reply 6 of 25
    jungmarkjungmark Posts: 6,647member
    I thought the X was too expensive to buy and had production delays to limit quantities? 
    watto_cobra
  • Reply 7 of 25
    matrix077 said:
    Who bought Apple stock when it's down a few weeks ago is a genius.
    I wanted to, but needed the money to buy the iPhone X.. 😁
    watto_cobra
  • Reply 8 of 25
    jungmark said:
    I thought the X was too expensive to buy and had production delays to limit quantities? 
    You are correct! Too expensive if you’re looking at the price alone and not consider what the iPhone X means—leading true innovations. Production delays because the demand is too high and there’s a finite amount that can be manufactured. 😂😂
    watto_cobra
  • Reply 9 of 25
    BebeBebe Posts: 116member
    matrix077 said:
    Who bought Apple stock when it's down a few weeks ago is a genius.
    I still got a few that bought 'em at $30ish 
    cincyteejasenj1watto_cobra
  • Reply 10 of 25
    Daryanani came up with just about the same number of iPhone units sold next quarter as I did on my back-of-the napkin figures.  What I disagree with is his statement "iPhone X availability is expected to improve going into 2018 and the following March quarter."  I can order an iPhone X right now on Apple's website and it is expected to ship before December 1.  There isn't any supply constraint now and anyone who wants one can get one in less than a month.

    I am still of the opinion that iPhone X orders will fall off a cliff once the initial demand is met.  People wanting a $1,000+ device are going to be on the cutting edge.  They may have been willing to wait until February to get one, but I think they would have preordered to get it locked in.  People buying the top-of-the-line models get them when first available.  That belief is also supported by the average selling price of the iPhone over past four years.  Q1 ASP has been consistently, noticeably higher than any other quarter during the year.  At some point people with the disposable income to purchase a $1,000 phone are going to simply wait until the 2018 phones come out.

    Edit:  Services is where the growth is, but I wonder how much of that is due to Apple Care being required on all monthly payment program phones.  I know Apple has a much higher participation rate in Apple Care than they did a few years ago when people paid $100-$200 every couple of years to upgrade and the remaining amount was simply built into the monthly carrier service contract.  You'll probably see a decent increase this quarter too as Apple Care on the iPhone X is 33% higher than on the 8 Plus.  However, unless unit sales return to a decent rate any revenue increases will be one-time gains.
    edited November 2017
  • Reply 11 of 25
    brucemcbrucemc Posts: 1,512member
    Folio said:
    Bank America Merrill Lynch did not raise their $180 target, which they established back in May. Their analyst Wamsi Mohan raised revenue expectations after yesterday's call and surprise, but not so much the earnings. They only give AAPL a 15x multiple, which they note is high by its historical standards. Due to the range of iPhone's it's tougher to predict margins. Personally, I'm more bullish and believe Apple shouldn't be lumped in with Hewlett Packard as peer. Here is the most bearish excerpt of today's BAML report: "What the bears will fixate on Bears will point to (1) Lack of clarity on supply demand balance for iPhone X, (2) Lower iPhone ASP in the Sep quarter ($618 vs. consensus at $638) bringing into question price elasticity (3) GM guide for F1Q18 (38.25%, mid-point) is lower than consensus of 38.6% (calls into question overall margins for iPhone X), (4) Lack of quantification of pre-orders (5) Reversal of lead times for iPhone X overnight back to three to four weeks. "Where we shake out In our opinion, it is too early to call the demise of the iPhone X despite limited commentary on the earnings call as the first selling date is Nov 3rd. Investors will watch the sell through data and determine if the mix, margin trajectory can support an upside case of $12+ in C18 EPS based on higher ASP and margins. Our estimate of $11.91 assumes solid sell through and a material step up in the ASPs of the iPhone."
    I guess the "analyst" is paid by the word.  If he/she/they/zee actually believe that any of this micro analysis matters for the stock price over the next 12 months, they are kidding themselves.  What is/will drive Apple upwards (with some down points along with the market, rumours, or the odd time where sales do drop a bit in a product category):
    - Capital return program.  Share buybacks, which is reducing the shares outstanding and increasing EPS.  Sales were up 12%, but EPS up 24%!  With Apple's excess cash generation, this story will continue for some time.  This is the #1 reason that Buffet bought into Apple.
    - The iPhone business has shown its resilience & Apple has shown they can grow (even if slowly) beyond it.  Apple will not do a Nokia / RIM / Palm.  Fullstop.
    - Services growth, which is following the increasing Apple installed based and broadening ecosystem

    Everything else is noise.
    montrosemacsradarthekatwatto_cobra
  • Reply 12 of 25
    lkrupplkrupp Posts: 6,712member
    With a better-than-expected iPhone 8 launch quarter...
    Better than expected? Wow, what an understatement. The iPhone 8 launch quarter was supposed to be a giant flop. No one was supposed to be buying the 8 because it was just a reworked 6, right? Well, at least that’s what the resident AI trolls were saying.
    magman1979radarthekatwatto_cobra
  • Reply 13 of 25
    lkrupplkrupp Posts: 6,712member

    Bebe said:
    Good initial customers' reaction to the $1000+ iPhone X. Disappointment to those who said that the iPhone X would not sell because it is too expensive.  :D
    And the really sad thing is that those who said it would not sell because it was too expensive and “crossed the line” will have only one rebuttal to put forth, the same one they always use when they have egg on their faces... people who buy Apple products are stupid. That’s all they really have.
    magman1979radarthekatwatto_cobra
  • Reply 14 of 25
    fallenjtfallenjt Posts: 3,974member
    Bebe said:
    Good initial customers' reaction to the $1000+ iPhone X. Disappointment to those who said that the iPhone X would not sell because it is too expensive.  :D
    I hate when Bloomberg said the last phone released, it started at $649, now $999. It's totally stupid and misleading. iPhone X is the premium version, a special edition, not an entry level one. iPhone 8 is still at $699 but with 2x of storage capacity (64GB). That's pretty much the same price as $649 at 32GB. It's a level on above of 8+ and guess how much a 64GB 8+ is: $799. Yeah, $799 with older technology. If people can afford $799 phone, I don't see the problem of spending $200 more or literally 27 cents/day  for the latest technologies in the best phone on the market.
    magman1979watto_cobra
  • Reply 15 of 25
    brucemcbrucemc Posts: 1,512member
    Once the analysts digest the reality (over next few months) that the overall iPhone lineup for FY2018 is working and the other product lines firing well, the concern will shift to "so OK, 2018 is going to be good, but that makes 2019 a difficult year in beating 2018, so whatever is Apple going to do...?".
    radarthekatwatto_cobra
  • Reply 16 of 25
    quinneyquinney Posts: 2,523member
    brucemc said:
    Once the analysts digest the reality (over next few months) that the overall iPhone lineup for FY2018 is working and the other product lines firing well, the concern will shift to "so OK, 2018 is going to be good, but that makes 2019 a difficult year in beating 2018, so whatever is Apple going to do...?".
    That's when Apple drops an AR wearable and announces a car.
    radarthekatwatto_cobra
  • Reply 17 of 25
    jasenj1jasenj1 Posts: 912member
    matrix077 said:
    Who bought Apple stock when it's down a few weeks ago is a genius.
    Thank you. But I didn't buy much, so not so genius.
    randominternetpersonradarthekatpscooter63watto_cobra
  • Reply 18 of 25
    jasenj1jasenj1 Posts: 912member

    brucemc said:
    Once the analysts digest the reality (over next few months) that the overall iPhone lineup for FY2018 is working and the other product lines firing well, the concern will shift to "so OK, 2018 is going to be good, but that makes 2019 a difficult year in beating 2018, so whatever is Apple going to do...?".
    Isn't that the standard trope? "Apple did surprisingly well this quarter. There's no way they can sustain this. This is the top. Get out now while you can. Blah, blah, blah."

    I really wonder if automated trading is responsible for a lot of the price fluctuation. Anyone who's been paying the slightest bit of attention knew the iPhone X was on the way. But when it actually releases (with a flood of news stories about people standing in line, etc.) suddenly there's a spike in the price? The smart people already had this factored into their price expectations - and bought a few weeks ago when the price dipped.

    I'm really tempted to sell some now and wait for the inevitable burst of negative news in a couple weeks driving the price down.
    edited November 2017 watto_cobra
  • Reply 19 of 25
    jasenj1jasenj1 Posts: 912member

    Folio said:
    They only give AAPL a 15x multiple, which they note is high by its historical standards. 
    Meanwhile, P/Es for Apple's peers
    Alphabet/Google: 35x
    Amazon: 278x
    Microsoft: 28x

    AAPL is still very cheap (and/or those other companies are overpriced).

    edited November 2017 randominternetpersonradarthekatwatto_cobra
  • Reply 20 of 25
    jasenj1 said:

    Folio said:
    They only give AAPL a 15x multiple, which they note is high by its historical standards. 
    Meanwhile, P/Es for Apple's peers
    Alphabet/Google: 35x
    Amazon: 278x
    Microsoft: 28x

    AAPL is still very cheap (and/or those other companies are overpriced).

    I think the assumption with AMZN is they will eventually own the entire Earth based on that P/E.
    randominternetpersonwatto_cobra
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