RBC: There are 3 things that will drive Apple's double-digit earnings growth

  • Apple’s stellar earnings for the fourth quarter has investors happy with the performance of the company.
  • After reviewing Apple’s 10K, an RBC Capital Markets analyst sees multiple upsides in the numbers for the company.
  • To view Apple’s stock price in real time, click here.


Apple
‘s standout fourth quarter earnings report has boosted investor sentiment about stronger earnings growth in the next quarter.

Amit Daryanani, an analyst with RBC Capital Markets, looked at Apple’s 10-K and saw multiple tailwinds that could drive double-digit EPS growth in the next two years:

  • The average selling price for the iPhone X, which can range from $US999 to 1,149, should give the Silicon Valley company’s profits a boost.
  • Gross margins should benefit from Apple’s service business, which Daryanani sees as growing at a faster-than-expected rate, and a better mix of its other higher-margin businesses.
  • Lastly, Daryanani cites potential tax reform as a tailwind for the company. The tech giant derives about 62% of its revenues overseas, and has reportedly used tax havens to avoid paying taxes to the US. Lawmakers’ plans to reduce the corporate tax rate and encourage repatriation of those foreign profits could fall in Apple’s favour.

Apple has floated around a $US900 billion market cap since its earnings report. Wall Street has been bullish, keeping a careful eye on its success in its penetration into emerging markets and its enterprise, or business, markets.

“We believe AAPL’s current stock price creates an attractive entry point for investors to benefit from its ability to generate revenue and EPS growth in FY18,” Daryanani wrote in a note.

Apple’s stock is at $US173.07 per share and is up 49.11% for the year.

Find out how close Apple is to becoming the first $US1 trillion company.

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