Apple Inc. (NASDAQ:AAPL) announced its fiscal 2015 third quarter earnings report after market close on July 21. While Apple grew revenue by 33%, put away $203 billion in cash, and expanded market share in nearly every product line, the tech giant still saw a run on its stock. Specifically, soon after releasing an upbeat earnings report, Apple’s shares fell as much as 7% in after-hours trading, erasing about $60 billion in market value.
Apple posted earnings per share of $1.85 on revenue of $49.6 billion, beating expectations of $1.81 per share on $49.43 billion. In percentage terms, this is Apple’s smallest EPS beat in two years, but analysts agree that the crumble in after-hours trading can be attributed to missed iPhones estimates.
While Apple sold 35% more iPhones in the fiscal third quarter compared to the same quarter a year earlier, iPhone sales missed the analyst consensus estimate of $49 million, coming in at $47.5 million.
A handful of Wall Street analysts have weighed in on Apple in light of the company’s recent Q3 earnings report.
On July 22, BMO Capital analyst Keith Bachman reiterated a Buy rating on Apple while maintaining his $145 price target, citing, “Apple delivered a very good quarter against high expectations.”
Bachman notes, “While Apple’s FCF is always a highlight, this quarter was particularly strong.” He explains, “FCF was 26% of revenue in the June quarter, compared to 21% of revenue in the year earlier period.” Furthermore, “In the nine months ended June 2015, FCF is over $60 billion, or almost 48% y/y growth, compared with 30% y/y revenue growth.”
In regards to gross margin, the analyst points out “Apple generated gross margins of 39.7% vs. our estimate of 39.5% and guidance of 38.5-39.5%.” He continues, “Even with FX as an incremental headwind of 30 bps, we believe that gross margin guidance of 38.5-39.5% for the September quarter is conservative.” The analyst projects gross margins of 39.5% for the September quarter.
When measured over a one-year horizon and no benchmark, Keith Bachman has an overall success rate of 72% recommending stocks and a +24.1% average return per recommendation. The analyst has rated Apple a total of 77 times since January 2009, earning an 80% success rate recommending the stock and a +35.6% average return per Apple recommendation.
On July 22, Cantor Fitzgerald analyst Brian White weighed in on the stock, reiterating a Buy rating while maintaining his $195 price target.
The analyst notes, “Apple is still in the midst of a transformational, super cycle with the first new product category in five years with Apple Watch, a multi-year iPhone cycle given the larger form factor, big momentum in China, potential new areas of innovation (e.g., streaming TV, growing interest in the car), and a rapidly expanding digital matrix (e.g., Apple Music, Apple Pay, CarPlay, etc.).” Furthermore, White believes that the tech giant’s future prospects are brighter than ever.
When measured over a one-year horizon and no benchmark, Brian White has an overall success rate of 68% recommending stocks and a +17.2% average return per recommendation. He has rated Apple a total of 116 times since October 2010, earning an 83% success rate recommending the stock and a +28.5% average return per Apple recommendation.
Daniel Ives of FBR & Co. also rated the stock on July 22, maintaining an Outperform rating and lowering his price target from $185 to $175. Ives notes that Apple has become the “gold standard” of technology. As a result, investors will be disappointed by “a good, but not great, iPhone shipment number (47.5 million versus whisper expectations at 49 million) during the June quarter, coupled with a conservative September forecast.”
He continues that while China remains the main fuel in the company’s engine, Apple has become a “prove me” stock as “the Street needs to feel comfortable that the iPhone 6/6 Plus growth story is alive and well.”
Ives concludes that the “lack of transparency around Apple Watch sales in its first quarter on the market” has become a “noisy issue around the Apple story.”
When measured over a one-year horizon and no benchmark, Daniel Ives has a 71% success rate recommending stocks and a +9.4% average return per recommendation. The analyst has rated Apple a total of 9 times since March 2015, earning a 100% success rate recommending the stock and a +2.8% average return per Apple recommendation.
Canaccod Genuity analyst Michael Walkley also reiterated a Buy rating on Apple, but lowered his price target to $155. Walkley believes that the “slightly lower than anticipated iPhone unit sales reported in the June quarter and implied in the September quarter guidance were primarily due to Apple lowering channel inventory ahead of the next-generation iPhone launch likely exiting the September quarter.”
The analyst adds that only 27% of existing iPhone users have “upgraded to the iPhone 6/6 Plus devices by Q3/1F’15,” and thus, the iPhone 6/6 Plus smartphones will generate “very strong replacement sales from existing iPhone consumers who slowed the pace.”
Walkley concludes that the current trends should “grow the iPhone installed base to over 500M exiting C2015,” which will ultimately drive “cash flow generation to fund strong long-term capital returns programs.”
When measured over a one-year horizon and no benchmark, Michael Walkey has a 69% success rate recommending stocks and a +22.8% average return per recommendation. He has rated Apple a total of 77 times since September 2010, earning a 78% success rate recommending the stock and a +29.8% average return per Apple recommendation.
Out of 39 analysts polled by TipRanks, 25 analysts are bullish on Apple, 12 are neutral, and 2 are bearish. The average 12-month price target for Apple is $151.37, marking a 21.51% potential upside from where stock is currently trading. On average, the all-analyst consensus for Apple is a Moderate Buy.