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