Wall Street wowed by iPhone X performance, but cools off on expectations of an Apple 'supe...

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in AAPL Investors edited February 2
Apple delivered record revenue in its holiday quarter, but went about it in a way different than investors expected, leaving analysts to rethink their so-called "super cycle" predictions for iPhone X unit sales growth. But with the average selling price of new iPhones soaring to unexpected highs, analysts remain bullish on the company's prospects in the months to come.




After-hours trading on shares of AAPL following the company's earnings call showed the mixed emotions investors were going through, as the stock went up and down by a few percentage points in a financial tug of war. Eventually, when markets opened on Friday, the stock was down slightly, and stayed off by a little more than $5 as of early afternoon trading.

Apple earned $88.3 billion in revenue in the holiday 2017 quarter, which reflected availability of the iPhone 8 and iPhone 8 Plus, as well as the launch of the iPhone X. Sales of iPhones were down slightly, from 78.3 million a year ago to 77.3 million this year, but that was offset by a surging ASP, which reached a record high of $796.42.

Following the news, Wall Street was left with a lot to unpack, and analysts weighed in with their takes. AppleInsider offers a summary of what was said in the wake of Apple's first fiscal quarter of 2018 earnings report.

Guggenheim

Analyst Robert Cihra is sticking with his lofty $215 price target along with a "buy" rating in the wake of earnings.

"Why worry?" he asked.

He believes AAPL stock is set up even better over the next one to two years, as analysts stop expecting a mythical one-year "super-cycle" and begin to see the iPhone X as a new high-end model introducing new technologies, such as an OLED display, Face ID camera, machine learning and more.

He expects iPhone units will grow 6 percent year over year in calendar 2018, followed by another 4 percent growth in 2019.


RBC Capital Markets

Heading into Thursday's earnings, a chief area of concern for investors was Apple's guidance for the next March quarter. Analyst Amit Daryanani said that while Apple guided below Wall Street expectations for the quarter, the iPhone unit guide came in better than had been feared.

That, coupled with stronger than expected demand for the iPhone X -- which was the company's top selling handset for every week it has been available -- have left Daryanani remaining bullish on the company's prospects.

For other points of strengths, he noted 18 percent growth in services, 36 percent growth in the "other" products category including Apple Watch and AirPods, and a 15 percent increase in iPhone average selling prices, to $796.

Reflecting the guidance for the March quarter, RBC cut its price target on AAPL, but only slightly, from $205 to $200. It has maintained an "outperform" rating for the stock.


Loup Ventures

"Don't overthink AAPL," analyst Gene Munster wrote, highlighting a growing device base and increasing revenue per device. He cautioned that investors can get too caught up in unit sales, causing them to miss the forest for the trees.

Munster did admit that he thinks Apple "stumbled" in launching two distinct new iPhone models in 2017, which he said could be a potential cause that unit sales dipped year over year.

"We think it was partly due to the more complex buying decision between iPhone 8 and iPhone X and partly due to the iPhone X's limited availability in the quarter," Munster wrote. "However, iPhone X has been the top-selling iPhone every week since it launched, which drove iPhone ASPs up 15% y/y to $796 vs. the Street at $756. Herein lies Apple's long-term opportunity: a growing active device base coupled with increasing revenue per device."


GBH Insights

Apple's December quarter was "good enough," analyst Daniel Ives said, but the "main event" of the earnings report was the much-anticipated March guidance.

"March revenue guidance and gross margins were better than feared with total revenue of $61 billion better than the feared $59 billion to $60 billion whisper numbers that bears were clawing to," Ives said. But he also noted that the numbers were blow lofty Wall Street expectations that surged as high as $65 billion before reports of alleged iPhone X production cuts spooked investors.

Ives has cut his forecast for fiscal year 2018 iPhone sales from 255 million units to between 235 million and 240 million. But he believes the combination of much higher ASPs, and a "push out" of 15 million to 20 million iPhones into fiscal year 2019, and tax repatriation and share buyback tailwinds should give investors confidence.

GBH Insights has maintained a "highly attractive" rating for shares of AAPL with a $205 price target.

Macquarie Research

"Fears of iPhone X weakness were overblown," analyst Ben Schachter said. He noted that an additional week in holiday 2016 skewed numbers, and when compared on a week-by-week basis, unit sales were actually up 7 percent year over year.

Like others, Schachter said March quarter guidance was better than feared.

And while the iPad and Mac numbers were characterized as "unexciting," Apple saw strong spots in its services business, continued growth for the Apple Watch, and a growing install base.

Macquarie maintained its $188 price target as well as an "outperform" rating.


Rosenblatt Securities

Analyst Jun Zhang has been a noted AAPL bear for some time, though the firm did switch from a "neutral" to "buy" rating on shares of the company last November. Since then, it has maintained a $180 price target, which held steady after the latest earnings call.

Zhang said that March quarter concerns from investors are "overblown," and issued a revised revenue estimate of $61 billion.

Zhang is also bullish on new iPhone models set to come later this year, projecting 10 percent year over year growth with the anticipation that three new models, including a 6.5-inch "iPhone X Plus" and a 6.1-inch LCD model are in the pipeline.
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Comments

  • Reply 1 of 32
    MacProMacPro Posts: 16,935member
    Wall Street thinking ... "How can we change the narrative so we analysts don't look total idiots"
    SpamSandwichStrangeDayswatto_cobrajony0
  • Reply 2 of 32
    MacPro said:
    Wall Street thinking ... "How can we change the narrative so we analysts don't look total idiots"
    Answer: They can’t.
    macseekerfotoformatwatto_cobrajony0
  • Reply 3 of 32
    I think Ives' unit sales are going to be a little optimistic.  With 77.3M actual  in Q1 and 52M - 55M estimated in Q2 Apple would need at least 103M sales in Q3 & Q4 to meet even his bottom end.  Apple has averaged just under 90M for the last two quarters over the past three years.  Highest ever was 95M in the iPhone 6 super year.

    Unless Apple releases next year's models early and you have a couple more weeks of new model sales in the last quarter I think unit sales are going to be between 220M and 225M.
    zoetmb
  • Reply 4 of 32
    Wall St Wowed!

    No they aren't. They are more interested in Amazon. 30% increase in turnover is what it is all about as far as they are concerned.
    Apple is old stuff, history.
    Why else would the stock price drop like it did today (-4.33 at the time of writing this).

    Apple should go private and then they would not have to suffer this sort of thing every 90 or so days.

    watto_cobra
  • Reply 5 of 32
    Re: “the miss”. “when compared on a week-by-week basis, unit sales were actually up 7 percent year over year.”

    Too often left out. Kudos to those that actually think. 
    watto_cobrajony0
  • Reply 6 of 32
    Wall St Wowed!

    No they aren't. They are more interested in Amazon. 30% increase in turnover is what it is all about as far as they are concerned.
    Apple is old stuff, history.
    Why else would the stock price drop like it did today (-4.33 at the time of writing this).

    Apple should go private and then they would not have to suffer this sort of thing every 90 or so days.

    Going private at this stage is unrealistic, if not impossible.
    jony0
  • Reply 7 of 32
    jungmarkjungmark Posts: 6,482member
    Can the analysts that spread FUD about the X lose their jobs? They should explain to their unfortunate clients how wrong they've been  
    watto_cobra
  • Reply 8 of 32
    JFC_PA said:
    Re: “the miss”. “when compared on a week-by-week basis, unit sales were actually up 7 percent year over year.”

    Too often left out. Kudos to those that actually think. 
    I didn't see a lot of qualifications after last year's earnings call.  Adjusting for the extra week both revenue sales would have been down 3% instead of being a new record, yet everyone (including here) was trumpeting the new record $78.4B revenue and 78.3 million unit sales.  Its confusing, but there were just as many people who didn't think last year before anointing Q1 2017 as Apple's best results ever.

    AppleInsider: "Apple's holiday 2016 quarter was the company's biggest ever, soaring to new heights on sales of 78.3 million iPhones following the launch of the blockbuster iPhone 7 series." "As usual, Apple's success was determined by the iPhone, which saw sales of 78.3 million units in the company's first quarter of fiscal 2017. That was an increase from the 74.8 million iPhones the company sold in the same quarter a year ago, holding the record until now." (No mention of the 14 week quarter in the article and It took 50 comments praising Apple's accomplishment before anyone pointed out the difference in weeks)

    http://appleinsider.com/articles/17/01/31/apple-smashes-expectations-record-setting-784b-in-revenue-on-sales-of-783m-iphones

    TechCrunch: "Apple breaks iPhone sales record with 78.3 million units sold in the holiday quarter"

    The Verge: "Apple sets a new record for iPhone sales"

    CNet: "iPhone 7 propels Apple to record-shattering sales"

    The list is practically endless.

    edited February 2 xzujony0
  • Reply 9 of 32
    ksecksec Posts: 1,479member
    Like I said the price of AAPL were too high for Wall Street / markets's liking.
    MacPro said:
    Wall Street thinking ... "How can we change the narrative so we analysts don't look total idiots"
    They didn't. They wanted the Super Cycle. And it didn't happen. It was the reason why now it is (still) P/E 17, when AAPL has always been (sadly) P/E ~15.

    Yes. The S&P average is around 26, and Apple's competitor in tech, are close to 30.

    I thought people should have learned this by now. Apple has been valued very differently to most stocks.
     
  • Reply 10 of 32
    It royally sucks to be honest. 
    Apple so far has turned out to be my worst investment in stock in a long time having bought in at the end of last year on the anticipation (my view) that revenues were gonna be great and that the X sold more than thought plus service growth was double digit etc. All true , but alas. 

    So despite huge revenue and the points above, market manipulation by analysts in the run up to the results plus Apple besting their own targets but missing analyst’s own ridiculous expectations results in a further 4.3% tanking in one day seems unjustifiable and unreasonable. 

    The market seems rigged. Would be better off with a tracker fund! 

    Amazing that investors listened when the analysts spread their FuD but now they don’t listen when their recommendations are for a price target of 188 to 215. 

    So now we wait for the eventual climb back up (wash rinse repeat!) ... just to get back where we were already at a week ago. 


    best quarter ever .... whatever. 



    watto_cobra
  • Reply 11 of 32

    Why else would the stock price drop like it did today (-4.33 at the time of writing this).
    The whole market is taking a beating today. It's not just Apple. Dow down 660 points.
    watto_cobra
  • Reply 12 of 32
    tzeshantzeshan Posts: 1,589member
    Wall St knocks down AAPL hard today to justify their negative reporting. 
    watto_cobra
  • Reply 13 of 32
    k2kwk2kw Posts: 1,058member
    78Bandit said:
    I think Ives' unit sales are going to be a little optimistic.  With 77.3M actual  in Q1 and 52M - 55M estimated in Q2 Apple would need at least 103M sales in Q3 & Q4 to meet even his bottom end.  Apple has averaged just under 90M for the last two quarters over the past three years.  Highest ever was 95M in the iPhone 6 super year.

    Unless Apple releases next year's models early and you have a couple more weeks of new model sales in the last quarter I think unit sales are going to be between 220M and 225M.
    Does anyone have an numbers on how many android switchers Apple is getting vs Apple users switching to Android?

    It doesn't seem to be that Apple is growing unitwise the way they used to up until the 6.


  • Reply 14 of 32
    Stock is down almost 5% today. Everyone long on Apple why do you think Wall Street sentiment on the company is going to change? Services revenues are up, other revenues from accessories are up. iPhone ASP is the highest it’s ever been and yet the stock is down nearly 5%. What is going to ever make them bullish on Apple?
  • Reply 15 of 32
    JFC_PA said:
    Re: “the miss”. “when compared on a week-by-week basis, unit sales were actually up 7 percent year over year.”

    Too often left out. Kudos to those that actually think. 
    But wasn’t iPhone 7 released a week earlier than the 8 was? Wouldn’t that first week of 7 sales need to be added to the holiday quarter to get an apples to apples comparison?
    avon b7
  • Reply 16 of 32
    Stock is down almost 5% today. Everyone long on Apple why do you think Wall Street sentiment on the company is going to change? Services revenues are up, other revenues from accessories are up. iPhone ASP is the highest it’s ever been and yet the stock is down nearly 5%. What is going to ever make them bullish on Apple?
    If Apple lifts the dividend ? Normally helps! 

    Or if Apple blows the so called analysts expectations out of the park. 


  • Reply 17 of 32


    Why else would the stock price drop like it did today (-4.33 at the time of writing this).
    The whole market is taking a beating today. It's not just Apple. Dow down 660 points.
    Amazon was up nearly 3% today. 
  • Reply 18 of 32
    k2kwk2kw Posts: 1,058member
    lewchenko said:
    It royally sucks to be honest. 
    Apple so far has turned out to be my worst investment in stock in a long time having bought in at the end of last year on the anticipation (my view) that revenues were gonna be great and that the X sold more than thought plus service growth was double digit etc. All true , but alas. 

    So despite huge revenue and the points above, market manipulation by analysts in the run up to the results plus Apple besting their own targets but missing analyst’s own ridiculous expectations results in a further 4.3% tanking in one day seems unjustifiable and unreasonable. 

    The market seems rigged. Would be better off with a tracker fund! 

    Amazing that investors listened when the analysts spread their FuD but now they don’t listen when their recommendations are for a price target of 188 to 215. 

    So now we wait for the eventual climb back up (wash rinse repeat!) ... just to get back where we were already at a week ago. 


    best quarter ever .... whatever. 



    I am thinking that the next two quarters will be really bad in term of units sold.  Very high ASP but a big Fall off due to ThrottleGate .   Also Apple will be paying for a lot of batteries.

    We will also see if the Android Market copies Apple with their own knockoff version of FaceId or if they do TouchId under Display.   And how successful they will be.

    HomePod should see at least 3 miilion units and add at least $1 billion to revenue or it's a failure.  That should be easy - The echo sells a lot more but it is cheaper.
  • Reply 19 of 32




    I am thinking that the next two quarters will be really bad in term of units sold.  Very high ASP but a big Fall off due to ThrottleGate .   Also Apple will be paying for a lot of batteries.

    We will also see if the Android Market copies Apple with their own knockoff version of FaceId or if they do TouchId under Display.   And how successful they will be.

    HomePod should see at least 3 miilion units and add at least $1 billion to revenue or it's a failure.  That should be easy - The echo sells a lot more but it is cheaper.
    From what I can see in the UK Apple is really restricting those replacement batteries. A colleague was told this week he would have to wait till April for a replacement iPhone 6 battery. 
    Plus remember they are still charging £25 /$30 for them so not really losing money. 

    Throttle gate will hurt though as some public trust has been lost (people in my office openly saying they don’t trust Apple and won’t be buying another iPhone) and the ongoing legal investigations might even result in fines in some countries. (Look how easy the regulators extract money from banks when they make misakes)

    New iphones in September will do well though  (X plus especially despite high price) but by then analysts will have yet another unrealistic target. 

    Is it enough... ?

    with 1.3billion iOS devices ,  more service revenue to extract but we all know wall street only cares about 1 thing ....

    “how many iPhones  did they sell ?”

    not it how much money made (unless that too is under “expectations”)

    Also Mac sales down ... that’s an easy one. Pretty stale line up with last gen processors and a lack of modernisation in terms of design / balanced features  across most lines with some lines looking abandoned (eg mini, air ). Prices are also high (base and upgrades) so not much value. Not good and no wonder sales are down and probably gonna get worse. 

    Im in the market for a new phone and a new Mac this year .. iPhone X plus is likely but holding off on the Mac until something decent , up to date and reasonably priced lands. 

    In android land the affordable semi flagship is gaining massive momentum .. so many people I know now have one plus 5T’s for example.  (Its half the price of an iPhone X ) 
  • Reply 20 of 32
    lewchenko said:
    Stock is down almost 5% today. Everyone long on Apple why do you think Wall Street sentiment on the company is going to change? Services revenues are up, other revenues from accessories are up. iPhone ASP is the highest it’s ever been and yet the stock is down nearly 5%. What is going to ever make them bullish on Apple?
    If Apple lifts the dividend ? Normally helps! 

    Or if Apple blows the so called analysts expectations out of the park. 


    That’s not really fundamentally changing sentiment about the company. Under Tim Cook Apple doesn’t seem to lowball guidance so I’d be surprised if they blew past their Q2 guidance.
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