Analysts cite robust iPhone X demand, continued services growth as highlights of earnings

Posted:
in iPhone edited May 2018
With Apple's March quarter results quieting naysayers, at least for the time being, analysts have started to react to the company's blockbuster second quarter earnings.

iPhone performance was better than expected when Apple announced earnings Tuesday


After Apple beat expectations in Tuesday's earnings release, Amit Daryanani of RBC Capital Markets titled his note "Proving Skeptics Wrong...Again," while setting his Apple price target at $203.

"More than just an iPhone story"

"The strength in revenues reflects continued growth from iPhones (+14% revenue, 3% unit growth) coupled with acceleration in services (+31% y/y) and other (wearables, +37% y/y)," Daryanani added. "We think slowly but surely, [Apple] is morphing into more than just an iPhone story and is displaying ability to sustain revenue growth irrespective of iPhone trajectory."

Other analysts also noted the better-than-expected iPhone performance.

"Investors have so far seemed unimpressed by the iPhone X uptake since its launch," Robert Cihra of Guggenheim Partners wrote in a note Wednesday. "But we think they should be MORE impressed by Apple's ability to raise its blended iPhone ASP double digits Y/Y while effectively still maintaining unit share in an otherwise no-growth smartphone market, illustrating the power of its high-end demographic and peel-off-the-top model."

Cihra maintained his buy rating for Apple's stock and set a price target of $215.

"Other businesses matter"

Ben Schachter of Macquarie Research was a bit less enthusiastic, setting his price target at $197 and maintaining his outperform rating.

"The fact that iPhone could be somewhat weak and yet the model can show EPS growth of 30% y/y is a testament to a model that is evolving," Schachter wrote.

"While iPhone is clearly still the single most important input, [Apple] is showing that its other businesses matter, and success in Services is now a major factor. While we have been more cautious on some of the Services drivers recently, [Apple] showed that Services is now diversified enough that despite our concerns on slowing App Store growth, other drivers are working."

Jun Zhang of Rosenblatt Securities maintained his Buy rating and set a target of $180.

"We believe that after Apple reported a slightly better quarter and guided better than the market anticipated, Apple's supply chain should look towards an increase in the 2nd half," Zhang wrote in his note. "Due to meaningful design upgrades and different component solutions for the new iPhone Models, Apple needs to reduce most of their components, such as panels, RF, 3D sensing, and some commodity components. We believe this is the key reason that Apple's supply chain might still provide weak guidance for the June quarter, even as Apple's guidance was better than expected."

Zhang added that "We think iPhone shipments in the June quarter may be higher than our previous estimates of 37 mln units. Based on Apple's recent guidance, we now believe iPhone shipments may be in the range of 38-39 [million] units."

The supply chain remains a bad predictor of Apple's earnings

The analyst whose skeptical note two weeks ago sent Apple's stock tumbling, Katy Huberty of Morgan Stanley, acknowledged that she'd gotten it wrong.

"Weaker iPhone supplier results suggested meaningful downside in the June quarter which didn't come to fruition," Huberty said. "While forecasted iPhone shipments of 39M units is lower than our 42M estimate a month ago, it's far better than our 34M estimate which reflected the weaker June quarter outlook from suppliers like TSMC and AMS."

"Further, iPhone ASPs will actually decline less than seasonal in June given March quarter sell-through," added Huberty. "ASPs were higher than reported given the iPhone X channel inventory drawdown."

Huberty also noted that the services category, which surged 31 percent year over year, is now the "primary growth driver."

Steve Milunovich of UBS kept his buy rating and set a price target of $190. He had four key takeaways: The iPhone X is selling better than commonly thought; services and wearables have picked up slack to provide revenue balance as the iPhone matures; the dividend hike was smaller than it could have been, and that the inventory increase is "component buy-aheads to procure better pricing."

Milunovich also addressed the weeks of negative stories from the supply chain.

"Why the supply chain negativity? The caution appears to reflect mix more than units," said Milunovitch. "Perhaps Apple is using the current processor for the coming LCD model, and the high-end mix might be less next cycle. Services growth of 31% was impressive -- Apple should reach its goal of doubling services over four years organically."

Comments

  • Reply 1 of 11
    BebeBebe Posts: 145member
    Analysts suddenly changing tones?  Oh my ...
    lovemnpeterhartracerhomie3jony0watto_cobra
  • Reply 2 of 11
    KuyangkohKuyangkoh Posts: 839member
    Where are those analysts now?? They are so quiet all of a sudden.....they bz making money on wrong assumptions and spreading false rumors.....they should be jailed for manipulating stocks
    peterhartracerhomie3gilly017watto_cobra
  • Reply 3 of 11
    jasenj1jasenj1 Posts: 922member
    After pushing the price down leading up to the earnings report, analysts now pumping AAPL so they and their clients can sell.

    The game is rigged. Learn to play along. I bought a few shares at $165ish. Wish I'd been able to buy more.
    macxpressBebegilly017watto_cobra
  • Reply 4 of 11
    macxpressmacxpress Posts: 5,457member
    jasenj1 said:
    After pushing the price down leading up to the earnings report, analysts now pumping AAPL so they and their clients can sell.

    The game is rigged. Learn to play along. I bought a few shares at $165ish. Wish I'd been able to buy more.
    I bet if Apple were a private company there wouldn't be anywhere near the crap we hear every day. I do wish Apple were private. 
    watto_cobra
  • Reply 5 of 11
    rogifan_newrogifan_new Posts: 4,297member
    Apple’s services were 15% of revenues. That’s more than iPad, Mac or accessories. I have a feeling as services continues to grow there will be pressure from Wall Street for Apple to break down the components. Right now services is a bit of black hole. I’m sure Apple is fine having it be that way but Wall Street will want more color.
    watto_cobra
  • Reply 6 of 11
    wonkothesanewonkothesane Posts: 1,644member
    Dear analysts, can you just go away please?

    Now?

    thank you. 
    watto_cobra
  • Reply 7 of 11
    jungmarkjungmark Posts: 6,924member
    Apple’s services were 15% of revenues. That’s more than iPad, Mac or accessories. I have a feeling as services continues to grow there will be pressure from Wall Street for Apple to break down the components. Right now services is a bit of black hole. I’m sure Apple is fine having it be that way but Wall Street will want more color.
    Who cares what WS wants? Apple will report what is legally required.

    WS hasn't convinced Amazon to release real unit sales. Why would they have better luck convincing Apple. 
    watto_cobra
  • Reply 8 of 11
    SuttaDostSuttaDost Posts: 15member
    Kuyangkoh said:
    Where are those analysts now?? They are so quiet all of a sudden.....they bz making money on wrong assumptions and spreading false rumors.....they should be jailed for manipulating stocks
    They should be worshipped for creating such "buy the dip" opportunities. 
  • Reply 9 of 11
    rogifan_newrogifan_new Posts: 4,297member
    jungmark said:
    Apple’s services were 15% of revenues. That’s more than iPad, Mac or accessories. I have a feeling as services continues to grow there will be pressure from Wall Street for Apple to break down the components. Right now services is a bit of black hole. I’m sure Apple is fine having it be that way but Wall Street will want more color.
    Who cares what WS wants? Apple will report what is legally required.

    WS hasn't convinced Amazon to release real unit sales. Why would they have better luck convincing Apple.  
    I think Tim Cook is more friendly to Wall Street than Jeff Bezos. But I’m not saying Apple will break out this data. They most likely won’t even though I think there will be pressure to do so.
  • Reply 10 of 11
    brucemcbrucemc Posts: 1,541member
    macxpress said:
    jasenj1 said:
    After pushing the price down leading up to the earnings report, analysts now pumping AAPL so they and their clients can sell.

    The game is rigged. Learn to play along. I bought a few shares at $165ish. Wish I'd been able to buy more.
    I bet if Apple were a private company there wouldn't be anywhere near the crap we hear every day. I do wish Apple were private. 
    Not sure what company / group of investors is going to pony ~$1 Trillion to take them private though (this is attaching slightly under a 15% premium on current stock price).
    jasenj1watto_cobra
  • Reply 11 of 11
    crabbycrabby Posts: 38member
    Who are these people of the Death to Apple clan? Thirty years ago we replaced the PCs in our office withMacs and noticed a substantial increase in productivity & happiness by all. Twenty years ago the gloomers were telling us it was the end- despite APPL having more cash on hand than its market capitalization. Perhaps I should thank them for making me buy the stock at $22- which then split 2:1. But the hate seems to go on and on...
    edited May 2018 watto_cobra
Sign In or Register to comment.