Brean Capital provides their top stock picks for the quarter, including Apple Inc. (NASDAQ:AAPL), Skyworks Solutions Inc (NASDAQ:SWKS), Qorvo Inc (NASDAQ:QRVO), Etsy Inc (NASDAQ:ETSY). The markets may be off to a rough start in 2016, but Brean Capital notes several reasons to be bullish on these top picks.
Tech giant Apple is one of Brean Capital’s top picks for the quarter. On January 11, 2016, Ananda Baruah gave a Buy rating on the company with a $70 price target. The analyst is bullish on the stock due to its “setup in the context of valuation,” however he notes that some data points need to stabilize. He also believes the company can ship the same number of iPhones this year as it did last year, contrary to other analysts who are bracing for decelerating iPhone sales.
Pointing to near-term catalysts, Baruah explains, “Mar Q iPhone builds have softened in the last 90 days and our view on Mar Q ‘shipments’ has declined from 62M iPhone units 90 days ago to ~50 – 52M currently.” He continues, “We 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%.”
According to TipRanks, 28 analysts are currently bullish on Apple, 6 are neutral, and 1 is bearish. The average 12-month price target between these 35 analysts is $136.55, marking a 40% potential upside from where shares last closed.
Skyworks Solutions Inc
Skyworks remains a top pick for Brean Capital despite increasing concerns about Apple’s iPhone sales, since Skyworks is one of the tech giant’s suppliers. On January 8, 2016, analyst Mike Burton reiterated a Buy rating on the company but lowered his revenue estimates to reflect these concerns. Despite these new estimates, he remains bullish, calling Skyworks “one of the most attractive stocks in Semis right now… setup for outperformance in 2016.”
The analyst expects the company to look for M&A opportunities to diversify its segments and bolster growing areas. Although he is concerned about the company’s earnings, he notes that the lower figures are “well expected by investors” and trusts that “management will maintain its strong execution record.”
Ten analysts polled by TipRanks are bullish on Skyworks while 1 remains neutral. The average 12-month price target for SWKS between these 11 analysts is $102.90, marking a 69% potential upside from where shares last closed.
Voicing similar concerns for Qorvo as Skyworks, Mike Burton is cautious on Qorvo, one of Apple’s suppliers, reiterating a Buy rating and $70 price target on December 10, 2015. He believes Qorvo will be hit by expected decelerating Apple sales. He explains, “We had been concerned about Apple for Qorvo going into the March quarter but clearly the cuts are hitting earlier in December. We believe Apple is now at least partially de-risked and the massive sell-off has created a great opportunity to purchase QRVO shares.”
However, Burton is quick to add, “QRVO has the broadest portfolio of top-of-class RF components and is set to regain share and increase margins in CY16.” He points to Samsung and MediaTek as sources to help the company regain market share in the first half of this year. The analyst currently has a Buy rating on the stock with a $55 price target.
According to the 11 analysts polled by TipRanks in the last 3 months, 9 are bullish on Qorvo and 2 remain neutral. The average 12-month price target between these 11 analysts is $60.33, marking a 65% potential upside from where shares last closed.
Tom Forte of Brean Capital highlights the handmade and vintage e-commerce site as a top pick for 2016, assigning a Buy rating and $20 price target for the company on November 4, 2015. He explains, “We believe Etsy’s seller services efforts (advertising, payments, and shipping) provide multiple means for the company to materially increase the value of its platform of 22.6M buyers and 1.5M sellers.” Forte currently has a Buy rating on the stock with a $20 price target.
The analyst highlights high mobile app conversation rates as the company has successfully driven more traffic to its app. In addition, he comments, “Comparisons become easier for its international gross merchandise sales (GMS)… as it laps the significant strengthening of the US dollar against major currencies.”
According to the 5 analysts polled by TipRanks in the last 3 months, 1 is bullish on the company, 1 is bearish, and 3 remain neutral. The average 12-month price target between these 5 analysts is $12.31, marking a 76% potential upside from where shares last closed.