Apple will announce its first-quarter earnings on Tuesday night, and it’s shaping up to be its most important earnings report in a long while.
Most analysts are predicting that sales of Apple’s iPhone will fall year-over-year for the first time. The iPhone contributes over 60% of Apple’s total revenue, and is the company’s most critical product. If sales of the iPhone are down, then Apple itself could be down year-over-year.
The challenge for investors is figuring out how lowered expectations for iPhone sales have already factored into Apple’s stock price. After all, Apple is still expected to report massive profits this quarter as well as roughly $76 billion in revenue. But if the company’s historic hot streak is ending, then investors who priced the stock based on continued growth might find their appetite for Apple is diminished.
Here’s a quick roundup of what Wall Street is expecting ahead of today’s earnings.
Piper Jaffray, well known for being bullish on Apple, thinks now is the time to buy the stock at a discount, setting a target price of $179.00:
We are buyers of AAPL going into next week’s earnings and over the next month based on a belief that over the next 6 months the stock will react similarly to past number change cycles (i.e., iPhone 5 and 6), and experience P/E multiple expansion.
Piper Jaffray also believes that Apple is poised to increase its share buy back:
As investors factor in growth concerns around difficult iPhone comps, we believe it is important to remember the impact of share buybacks. We expect AAPL can continue to repurchase at least $20-30 billion in shares per year over the next several years.
J.P Morgan is “overweight” Apple, and has a “cautious” outlook for the stock given recent supply chain rumblings:
Our Asian supply chain analysts believe that build plans for FQ2 have likely stabilised in the 40-45m range now, down from 45-50m in December.
Brean Capital analysts speculate that Apple might be doing an inventory correction this quarter to set itself up for a return to growth later this year.
Just “Spit Balling” here, but we believe that there is “some” chance that given the stock action and the already inherently low expectations that AAPL is looking to “tear-off the inventory Band-Aid” and to reset to a bar they can again begin exceeding ahead of 1) the 4-inch phone launch and 2) the iPhone 7 launch in the fall.
RBC Capital Markets gave Apple an “outperform” rating, bumping its price target to $130, advising that the stock’s current price is an “attractive entry point for investors.”
Notably, we believe emerging market penetration will remain a key and material revenue driver for the company over the next several years. Furthermore, we believe success and growth in Enterprise markets will open up a stickier and higher-margin segment.
Analysts at Deutsche Bank worry about Apple’s struggle to grow revenue, and rate the stock a hold.
Apple has a dominant position in smartphones and tablets where its products represent the gold standard in both categories… Despite healthy growth, slowing smartphone and tablet sales, as well as Apple’s already significant revenue levels suggest growth will be more difficult.
Credit Suisse analysts have already factored a decrease in iPhone sales into its models, but still rates the stock “outperform” with a target price of $140.
Despite this reduction in our estimates, we remain constructive long term given high retention rates, a superior ecosystem, a potential quickening of the replacement rate from the iPhone Upgrade Program, and a multi-product compute advantage.
Analysts at Co wen and Company are targeting Apple at $125:
We rate AAPL Market Perform given: 1) growing risk of China demand reset and potential risk to iPhone unit and overall revenue growth; 2) our field work continues to suggest iPhone builds are tracking down cycle/cycle for the first time in a new iPhone launch; and 3) Apple Watch is not expected to contribute > 10% of total revenue before F2017.
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