William Blair analysts weighed in on stock giant Apple Inc. (NASDAQ:AAPL) and industrial giant General Electric Company (NYSE:GE). The analysts reflect on Apple’s supply chain reports and General Electric’s appliance deal. While one remains bullish on GE, citing predicted increases in EPS as a result of the Haier deal, the other voices concern over Apple suppliers’ dwindling demand, though keeps his bullish rating.
William Blair analyst Anil Doradla commented on Apple’s supply chain data yesterday, reiterating his Outperform rating on the company. The analyst states that in the last few weeks, major Apple suppliers such as Qorvo, Cirus Logic, and TSMC have all reported slowing demand. He also comments on the handset industry, stating, “the handset industry is experiencing strong headwinds that include a combination of macro-driven weakness, severe pricing pressures, and a crowded competitive landscape (predominantly on the price-sensitive Android handset front).” As a result, he expects Apple to also suffer from these headwinds, though not as much as the entire industry. Doradlaa is decreasing his March quarter and 2016 estimates.
General Electric Company
In addition William Blair analyst Nicholas Heymann reiterated an Outperform rating and $38 price target on General Electric, following the sale of General Electric’s appliance business to Haier for $5.4 billion.
The analyst believes that this deal “increases GE’s ability to expand its oil and gas and Alstom Energy restructuring”, as gains from the deal should offset the $500 million 2016 Alston restructuring costs. More specifically, the sale will the company to turbocharge its cost restructuring efforts, resulting in more resources to “accelerate building out its long germ aftermarket (from virtually zero in 2015) for service, maintenance, repair, and overhaul (MPRO) and data analytics.” The analyst also states that the deal will result in a $0.20 after tax gain per share.
According to the analyst, the company’s increased ability to expand its restructuring through decreasing costs will result in improved EPS for 2016 and 2017, with a possibility of the $800 million Alston restructuring costs for 2017 being ahead of schedule. The analysts states that the company’s EPS guidance for 2016 is on the conservative end, which should enable its current guidance to ultimately prove conservative.” He also believes this deal enables the company “to be an increasingly better steward of its capital” as it adjusts its portfolio as both an asset buyer and a business seller. The analyst states that the combination of recent decreasing oil prices and accelerated cost restructuring could result in an aftermarket business worth $8 to $10 billion, which will enable the company to “fly above the turbulence of the 2016 global economy.”
Analyst Nicholas Heymann has a 43% success rate recommending stocks with an average return of 0.2% per recommendation.
According to TipRanks’ statistics, out of the 9 analysts who have rated the company in the past 3 months, 6 gave a Buy rating while 3 remain on the sidelines. The average 12-month price target for the stock is $32.75, marking a 15% upside from where shares last closed.