There’s never a dull moment in the technology sector. Analysts are still reflecting on impressive earnings from Apple Inc. (NASDAQ:AAPL) this week. Aside from earnings, Canaccord weighs in on Oracle Corporation (NYSE:ORCL) as it presents at its OpenWorld conference.
Apple impressed yet again with strong quarterly results, as more and more analysts are expressing their optimism about the future performance of the brand. Analyst Michael Walkley from Canaccord took the earnings as an opportunity to weigh in on Apple, reiterating a Buy rating with a price target of $160.
Referring to the highlights of the results, Walkley notes that Apple’s revenues of $51.5 billion and EPS of $1.96 were higher than his own estimates of $51 billion and $1.86, respectively, and higher than consensus estimates of $50.9 billion and $1.88, respectively. While iPhone unit sales of 48.1 million were in line with consensus, they were below his estimates of 49.2 million units. However, the average selling prices (ASPs) of iPhones for the September quarter ($670) were higher than Walkley’s estimates of $628. He says, “Overall revenue growth of 22.3% was impressive, especially considering the 800bp f/x headwinds.”
In his report, Walkley attributes Apple’s strong performance to Mac sales as well as the impressive initial response to the iPhone 6S. Given that only 31% of iPhone’s user base has upgraded to iPhone 6/6S, Walkley expects the strong performance of iPhone 6/6S to continue, leading to market share gains in the high-end smartphone market.
Given the results reported for the September quarter and the implied guidance for the next quarter, Walkley has increased his iPhone shipment estimates for C’15/C’16 to the range of 233.1 million to 231.2 million, up from his earlier estimate range of 232.7 million to 226.35 million. Walkley also increased his EPS estimates for C’15/C’16 to the range of $9.32 to $9.91, up from his prior range of $9.17 to 9.90.
Out of 81 ratings for Apple’s stock, Michael Walkley has a success rate of 74% recommending the stock with an average return of 26.3% per Apple rating. According to TipRanks, out of 36 analysts who have recently rated Apple’s stock, 28 have rated it as a Buy, 7 have rated it as Hold, and only 1 has given a Sell rating to the stock. The average consensus price target for the stock is $147.26, an upside of 23.47% over current levels.
Richard Davis from Canaccord Genuity weighed in on Oracle as the company provides insight into its operations at the OpenWorld conference. Davis reiterated a ‘Buy’ for the stock but lowered his price target by $3.00, from $47 to $44. Davis says that his earlier bullish stance on Oracle was premature with two better-timed downgrades already in the stock.
For long-term investors, Oracle is definitely a Buy from Davis’ point of view. The analyst comments, “The firm is doing the right things by shifting to subscription and cloud architectures.” Additionally, Oracle has a great customer base and an excellent sales force that puts the company in a strong position to cross sell and upsell cloud to existing customers. He continues, “Near term, Oracle is doing quite well at the infrastructure layer.” But on the downside, he talks about long-term concerns around the price compression coming for data as Hadoop, a competing software, increases its market share.
To reassess his current ‘Buy’ rating, Davis is waiting for either more transparency from Oracle in terms of long-term targets, or a rally in the stock. While the latter could be for any reason; having followed Oracle for 16 years, he has reason to believe that getting any long-term targets from the company seems quite “unlikely.” Davis compares this practice to Adobe, a company that has provided explicit targets resulting in its stock price almost tripling in 3 year time frame. Davis hopes that Oracle understands that transparency is much-needed to drive their stock to higher multiples.
Richard Davis has rated Oracle’s stock 21 times. Based on these ratings, his success rate on the stock is 53% and his average return on the stock is 2.2%. According to TipRanks, of the 19 analysts who have recently rated Oracle’s stock, 12 have rated it as Buy, 6 have rated it as Hold, and 1 has rated it as Sell. The average consensus price target for the stock is $44.19, an upside of 13.66% from current levels.