Brean Capital analysts are weighing in with a few insights on the consumer electronics giant Apple Inc. (NASDAQ:AAPL) and micro-blogging giant Twitter Inc (NYSE:TWTR), after both companies released their earnings results yesterday evening.
Apple shares are up 2% after the company posted fiscal fourth-quarter earnings, leaving investors optimistic for this holiday quarter. Apple’s revenues of $51.5 billion were better than analysts’ estimates of $51.1 billion. Its EPS of $1.96 was also better than the $1.88 that analysts were expecting. This was the fifth consecutive quarter in which Apple beat analysts’ estimates.
Brean Capital analyst Ananda Baruah commented, “We come off the call with increased conviction in our ongoing GM upside thesis, and believe that AAPL could generate $3.35 + in Dec Q EPS. We further wouldn’t be surprised if AAPL delivered GM >41% for the Dec Q, while guiding 39% – 40% (every 50bps of GM is ~$0.05 in EPS). We believe iPhone GM could be approaching 47% – 48% That said, we believe the next true elongated stock “move” will be determined by what CY16 iPhone ships can look like, and the Street likely won’t have a view on that until April when AAPL reports the Mar Q.”
“We continue to believe that Street numbers are materially low through ’17. Fundamentally speaking, we believe AAPL stands to deliver material EPS upside from 1) favorable GM from both iPhones and iPhone mix (more 6 Plus’ than realized), and 2) materially more Opex $ leverage through at least ’16 as AAPL realizes the benefits from the recent investment cycles,” the analyst concluded.
Baruah reiterated a Buy rating on Apple shares, with a price target of $170, which implies an upside of 46% from current levels.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Ananda Baruah has a total average return of -4.0% and a 46.4% success rate. Baruah has a -5.6% average return when recommending AAPL, and is ranked #3557 out of 3804 analysts.
Out of the 36 analysts polled by TipRanks in the last 3 months, 28 rate Apple stock a Buy, 7 rate the stock a Hold and one recommends a Sell. With a return potential of 26%, the stock’s consensus target price stands at $147.12.
Twitter shares are down more than 7% after the company released weaker-than-expected financial guidance for the fourth-quarter, casting a spotlight on its struggle to boost its users.
In reaction, Brean Capital analyst Sarah Hindlian reiterated a Buy rating on TWTR, while reducing the price target to $42 (from $47), which represents a potential upside of 47% from where the stock is currently trading.
Hindlian wrote, “Once we back-out newly disclosed O&O revs. vs. 3rd party, we est. that Twitter’s guidance is embedding virtually NO benefits from Q4 ad or TellApart seasonality, or from the ramping DoubleClick partnership. As a result of our analysis, we feel highly convicted that guidance was sandbagged as Mr. Dorsey clears the decks. Given the generally positive tone on the conference call (best we have heard mgmt. in several quarters), focus on Moments, Auto-Play Video, and DoubleClick ramp in Q4’15, we continue to believe that it is too soon to give up on the stock.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Sarah Hindlian has a total average return of 7.6% and a 81.8% success rate. Hindlian has a -10.7% average return when recommending TWTR, and is ranked #827 out of 3804 analysts.
Out of the 42 analysts polled by TipRanks, 20 rate Twitter Inc stock a Buy, 20 rate the stock a Hold and 2 recommend a Sell. With a return potential of 37%, the stock’s consensus target price stands at $39.17.