As other analysts cut AAPL estimates, Guggenheim stands pat with bullish $215 target

AppleInsider

Ahead of Apple's December quarter results, analysts have been slashing targets for the company, based on a belief that iPhone sales are slower than expected. But Robert Cihra of Guggenheim hasn't budged on his $215 price target, telling investors on Wednesday that he sees the iPhone X as the start of a multi-year upgrade cycle.

Cihra did concede that he has heard that iPhone unit growth could be lower than expected. But in a new note to investors, a copy of which was obtained by AppleInsider, he countered that higher average selling prices have typically been a major revenue driver for the company.

With the iPhone X priced at $999 and up, he believes ASPs will be pushed further and help Apple's bottom line.

Cihra sees the iPhone X as the start of a multi-year upgrade cycle, in which Apple will adopt OLED screens, Face ID, and on-device machine learning in all of its handsets.

"Supply chain negativity looks like a buying opportunity to us, particularly as we estimate a lower tax rate likely keeping (earnings per share) in line," Cihra wrote.

Guggenheim first increased its price target to $215 last November. As of Wednesday, shares of AAPL were trading north of $167.

While Guggenheim held steady, other analysts have cut targets ahead of Thursday's earnings report. On Wednesday, BMO Capital Markets downgraded AAPL stock to "market perform," as analyst Tim Long predicted weaker-than-expected sales in the upcoming March quarter.

Appearing on CNBC, Long said Apple is currently between product cycles, which doesn't give investors much to be excited about. He predicted that the company could be in the midst of a 6-to-12-month cycle where the stock "trades sideways."

Apple will report the results of its holiday 2017 quarter after markets close on Thursday. It is expected that the debut of the iPhone X, as well as the first full quarter of availability for the iPhone 8 and iPhone 8 Plus, will represent the company's biggest three-month frame ever -- though investors are wary about the iPhone's prospects heading into early 2018.

maestro64

They keeps saying slow then "expected" but never do they said what is expected and where the numbers came from. It like me saying I expect the Patriots to score less than expected in the super bowl this weekend.

Does that mean they will win or loose?

I Just made a prediction can you prove I was right or wrong

edited January 2018

levi

Smart guy. Two trusted analysts I follow, Mark Hibban and Neil Cybart are predicting strong results, in excess of estimates. Neil’s summary analysis is free at aboveavalon.com. 

magman1979

We've seen these asinine "predictions" of doom and gloom EVERY, SINGLE, SOLITARY YEAR at this time for the last 8 years+ about Apple, and each time these anal-ysts have been proven dead wrong, but I think in 2018, they may FINALLY be exposed for their stupidity in relying on rumour, innuendo, and ridiculous supply chain checks to justify their idiocy, all in the name to manipulate the stock in pump-and-dump style tactics, which hurt Apple's brand, and the investors foolish enough to follow these idiots!

I truly hope some of these asshats will be taken to task for bluntly LYING as they do, and face the music for this! This has gone on long enough!

folio

Bank of America Merrill Lynch analyst, Wamsi Mohan, just reaffirmed $220 price target in a 22-page report. Basically Mohan's thesis is Apple has more diverse levers for growth now than in past. Excerpt of p.1 follows:

Discounting no growth in Hardware presents opportunity

Our analysis (Fig 1) suggests that shares of Apple are currently discounting a “declining growth in hardware” scenario (ex-cash and services), which is to us too pessimistic. Assuming $19 in net cash/share, $103/share for a no-growth hardware business and $57/share for a base case services business (Total $179), implies that the stock is already discounting a declining hardware business and a worse than run rate trajectory for services. With tailwinds from tax (we assume 21% rate but there could be more upside), and use of cash optionality, we view shares as particularly attractive. Reaffirm Buy.

Services present a strong secular tailwind

We build up Services revenue from App store, Apple Music, iTunes, Apple Pay, Apple Care, Licensing, iCloud, and other Services (Fig 2). Our detailed breakdown suggests that App store revenues, followed by iCloud will drive the bulk of the near term growth with potential longer term upside from Apple Music and Apple Pay. Given the better gross margin profile of services, we see potential upside to our gross margin estimates.

Don’t write off the hardware just yet as ex-growth

We view the hardware business (ex-services) to show growth over the next several years (18/19 driven by iPhone ASP, 2020 driven potentially by 5G/AR/VR, meanwhile accessories AirPods, HomePod, Apple watch continue to grow as do Macs). If the hardware business does go ex-growth, we think Apple will have room to harvest margins.

iPhones dominate the rhetoric for now

Although we remain below consensus on iPhone units at 228mn (F18), we see upside to ASPs and gross margins (FX, memory pricing tailwinds), which can make for a smoother cycle, and command a higher multiple. Given the concern of a guide down based on lower volumes of iPhone X, we view the setup into earnings as favorable. 

eightzero

All this has happened before. And it will happen again..

Soon all will be revealed.

78bandit

2Q estimates will tell the tale as to how successful the X is expected to be.  They need $65 billion in estimated revenue to continue the growth rate when compared to 2Q 2015 which was during the iPhone 6 supercycle.

My personal prediction is the rumored $700 6.1" LCD device next year will be the real start to the upgrade supercycle.  You've got a lot of people still using 5S, 6, 6S, and 7 phones that will be two-to-four years old and who passed on the X.  That new device is going to be very compelling compared to the $1,000 X or likely $1,150 X Plus.  I'm also hoping Apple does something in the 5.6" range in an LCD model too.  I can see those two models being very popular and returning Apple to where the latest generation devices account for a substantial majority of sales.

gregg thurman

levi said:

Smart guy. Two trusted analysts I follow, Mark Hibban and Neil Cybart are predicting strong results, in excess of estimates. Neil’s summary analysis is free at aboveavalon.com. 

Google search for Mark Hibban came up with nothing.  Where do I find him?  Send to gregg_thurman@me.com  Thanks.

gregg thurman

Others forecasting high price targets are:

Cascend Securities $220
Drexel Hamilton $235
Merrill Lynch $220

I have identified 13 analysts with price targets $200 or higher.  I believe all of these are for April or sooner.

My January 2019 target is $270.

rogifan_new

Someone’s going to look really stupid tomorrow.

ramanpfaff

I own lots. Hoping short term is good. Know long term is good. Dividends are my biggest concern. Increase.  

jonagold

magman1979 said:

We've seen these asinine "predictions" of doom and gloom EVERY, SINGLE, SOLITARY YEAR at this time for the last 8 years+ about Apple, and each time these anal-ysts have been proven dead wrong, but I think in 2018, they may FINALLY be exposed for their stupidity in relying on rumour, innuendo, and ridiculous supply chain checks to justify their idiocy, all in the name to manipulate the stock in pump-and-dump style tactics, which hurt Apple's brand, and the investors foolish enough to follow these idiots!

I truly hope some of these asshats will be taken to task for bluntly LYING as they do, and face the music for this! This has gone on long enough!

Right on, you nailed it. I’ve owned this stock long enough and this “fake news” that has plagued AAPL every single damn year should be investigated by the SEC. It’s complete market manipulation. Meanwhile, the company brought in so much cash over the years you would have thought they were printing it (or selling like hell...imagine that). No one took Jobs seriously, ever.  Not at the launch of OS X, not during the Intel conversion, the iPod, iPad, iPhone, iTunes Music, his passing...Tim Cook, Apple Watch, iCloud services.  The company exhausted its nine lives (OS X pun) so this year must be it; the year Apple declares bankruptcy.  Sarcasm aside, just follow the cash hoard, you’d don’t have to work on Wall Street to see it; it’s the elephant in the room the analysts don’t want to acknowledge and they all should have known that the accounting rules forced the company to spread the revenue on each phone sale over two years. Otherwise, revenue reported in “real-time” would have been much much higher and perhaps its the CFOs’ fault for not emphasizing that more strongly.  Many companies report non-GAAP info where relevant and I think Apple missed an opportunity there.  The revenue recognition rules will be changing soon enough, perhaps the narrative will shift going forward. 

gatorguy

Services revenue is not being given enough credit IMHO. Even IF hardware is flat I believe services will more than make up for it. Too much focus here on how the X sold. 

edited February 2018

maestro64

rogifan_new said:

Someone’s going to look really stupid tomorrow.

Actually what will happen is the market is going to ignore the pass since they will claim the numbers already factor in the pass. They will look at the forward looking, but compare it to last quarter and be upset it not was good at last quarter and say they are a failure. They can not look back because looking back mean they would have to compare the real number to what they have been say and admit they were wrong yet again. Analysis, now fall in to the same class as Lawyer and Doctors who will never admit they made a mistake.

brucemc

Missing in all the discussion:
- Falling USD provides a tailwind for non-US revenue (a large majority), which is reversal of past several years
- Repatriation of cash, which will accelerate share buybacks, which puts upward pressure (or at least stabilizing) on prices on its own, and increases future earnings-per-share
- Regardless of iPhone discussion (which I think will show good numbers), all Apple's other businesses are doing well.  AW & AirPods will show strong growth in other (starting to provide some meaningful billions), iPad has bottomed and is going through an upgrade cycle, and Mac's stabilized with potential for some small growth.  Services chugging along with double-digit growth and is now Apple's second largest "product line".

It is true that iPhone is near the peak of units-sold-per-year.  Some years will be up, some down.  Expanding the line at the top and bottom will net some new adds, and overall increase ASPs.  If measuring over a rolling 2-3 year period, I would expect iPhone revenue to grow in the single digits for awhile.

Perhaps most importantly, the Apple Watch is looking strong, with AirPods as a highly desired accessory.  AW has the field of smart wrist wearables (not dedicated fitness trackers) entirely to its own right now.  It is kind of iPod like in dominance.  This is key as it shows that, more than anyone else, Apple has a path to a post-smartphone future.  Apple will pass a cumulative 50M Apple Watch units sold this fiscal year, with I suspect 25M units to be sold this calendar year.  That is just with the current functions.

Apple is investing in health more than any other consumer electronics company.  AW is miles ahead of competition.  If (when) Apple gets a must have health benefit (not magic, but something like identifying heart conditions of arrhythmia, blood pressure), you will see AW sales skyrocket (I could see 100M+ annually in 5 years in that scenario).

Apple's investment in augmented reality will eventually (I think it will take a min 2-3 more years) bring an Apple "glasses" product.  Apple will have the premium full wearables line (wrist as hub + ears + eyes).  Together these items likely have the ASP of a premium iPhone.  And Apple will still be selling over 200+M iPhones per year then.

So no, I am not too worried about Apple...

carnegie

jonagold said:

magman1979 said:

We've seen these asinine "predictions" of doom and gloom EVERY, SINGLE, SOLITARY YEAR at this time for the last 8 years+ about Apple, and each time these anal-ysts have been proven dead wrong, but I think in 2018, they may FINALLY be exposed for their stupidity in relying on rumour, innuendo, and ridiculous supply chain checks to justify their idiocy, all in the name to manipulate the stock in pump-and-dump style tactics, which hurt Apple's brand, and the investors foolish enough to follow these idiots!

I truly hope some of these asshats will be taken to task for bluntly LYING as they do, and face the music for this! This has gone on long enough!

Right on, you nailed it. I’ve owned this stock long enough and this “fake news” that has plagued AAPL every single damn year should be investigated by the SEC. It’s complete market manipulation. Meanwhile, the company brought in so much cash over the years you would have thought they were printing it (or selling like hell...imagine that). No one took Jobs seriously, ever.  Not at the launch of OS X, not during the Intel conversion, the iPod, iPad, iPhone, iTunes Music, his passing...Tim Cook, Apple Watch, iCloud services.  The company exhausted its nine lives (OS X pun) so this year must be it; the year Apple declares bankruptcy.  Sarcasm aside, just follow the cash hoard, you’d don’t have to work on Wall Street to see it; it’s the elephant in the room the analysts don’t want to acknowledge and they all should have known that the accounting rules forced the company to spread the revenue on each phone sale over two years. Otherwise, revenue reported in “real-time” would have been much much higher and perhaps its the CFOs’ fault for not emphasizing that more strongly.  Many companies report non-GAAP info where relevant and I think Apple missed an opportunity there.  The revenue recognition rules will be changing soon enough, perhaps the narrative will shift going forward. 

Apple used to, in accordance with accounting rules which were in place then, defer most of the revenue from iPhone sales and recognize it over a two-year period. When that was the case, Apple did provide non-GAAP revenue and net income measures.

But those rules changed a while ago. Now most revenue from iPhone sales is recognized in the current quarter. Only a small portion of it is deferred and recognized over a two-year period. The last time I recall Apple providing numbers on that front, it was something like $20 per unit (for iPhones) which was recognized over time. And that deferred revenue is, in any given quarter, mostly offset by revenue from previous quarters being recognized currently. The reported revenue (for iPhones) in some quarters is a little lower than what was actually the case, and in others it's a little higher. But the effect on particular quarters isn't all that large and, over time, balances out.