Analysts are weighing in on the tech giant Apple Inc. (NASDAQ:AAPL) following new information regarding suppliers, and online media giant Yahoo! Inc. (NASDAQ:YHOO) after the company announced that it will discontinue efforts to spin off its remaining stake in Alibaba. Lets take a look and see what the analysts have to say about AAPL and YHOO.
Top analysts from Drexel Hamilton and Pacific Crest recently weighed in on tech giant Apple regarding sales figures and production levels. Both are bullish due to predicted healthy sales and firm estimated supplier production levels.
Analyst Brian White of Drexel Hamilton weighed in on AAPL after its Taiwanese touch technology manufacturer TPK reported disappointing earnings last Friday. The company reported a 6% decline in November sales, which some attribute to slowing iPhone 6S sales, as Apple is one of the company’s key customers.
White states that despite these earnings, he is not worried about Apple. The analyst points to a difference in time frames for iPhone production, which are being compared year over year, as the reason for the sales decline. White also cited positive news from the firm’s October China-Taiwan Tech Tour which “highlighted a view that the iPhone 6/6s Plus would not outperform the iPhone 6/6 Plus last year but older iPhones version were performing very well.”
He states that despite a sales decrease, “the delayed production of the iPhone 6 Plus last year hurt the supply chain early in the ramp but began to help sales as the quarter progressed. This year, yields on both new iPhones were healthy. Moreover, our Apple Monitor experienced a stronger than average performance in October.”
The analyst continues with positive sentiment regarding the stock price, citing that the Apple Watch will help ramps up sales, especially in China. White states, “in our view, Apple remains one of the most undervalued technology stocks in the world (just over 9x our CY:16 EPS estimate, ex-cash) and we believe the Apple Watch is positioned to finally break out to the masses this holiday. We also believe Apple is well positioned to benefit from the Chinese New Year that begins on February 8, 2016.” The analyst reiterated his Buy rating on AAPL keeping his $200 price target.
According to TipRanks’ statistics, analyst Brian White has a 56% success rate recommending stocks with an average return of 12.2% per recommendation.
Separately, Analyst Andy Hargreaves of Pacific Crest weighed in on Apple following his firm’s checks regarding iPhone component orders. He estimates that Apple has ordered enough components for the second quarter to produce 50 million iPhones. Hargreaves states that Apple’s sell-in, or sales to distributors before reaching the public, usually exceeds his firm’s estimates, as Apple’s suppliers use the previous quarter’s component inventory as a benchmark. Therefore, his supply checks match the FQ2 sell-in of 55 million units, although this could increase with higher than expected production levels. However, the sell-in of 55 million units is below his own estimates of 59 million, which could result in a lower stock price.
Regarding these estimates the analyst states, “We believe many investors already expect FQ2 iPhone units of 55 million, with some anticipating FQ2 units as low as 50 million. So, while we see risk to sell-side estimates, including our own, we believe Apple is much better positioned to meet buy-side expectations.” Apple has recently proved healthy and growing demand, as key supplier Avago recently reported stellar earnings, citing order growth from its main customer Apple, although not directly referring to the company. Overall, Hargreaves notes that Apple is a key industry player for smartphones, sustaining gains in market share with a strong brand, industry conditions, and iPhone utility. The analyst maintains his Overweight rating and price target of $142.
According to TipRanks’ statistics, Andy Hargreaves has a 70% success rate recommending stocks with an average return of 31.7%. Out of the 24 analysts who have rated APPL in the last 3 months, 26 gave a Buy rating while 8 remain on the sidelines. The average 12-month price target for the stock is $149.36, marking a 26% upside from where shares last closed.
Yahoo announced a big change of plans yesterday, revealing that it will not attempt to spin off its stake of Alibaba. Yahoo had been planning to complete the $30 billion spin off, even after the IRS denied the company’s filing for a favorable tax ruling in September. Consequently, Yahoo was not sure how the spin off would be taxed. However, the company made plans to move forward with the transaction regardless of a defined tax rate. Now that Yahoo is discontinuing plans to follow through on the spin off, new reports claim that Yahoo will instead spin off its core business.
In light of this significant change of direction, Gene Munster of Piper Jaffray reiterated an Overweight rating on the company with a $39 price target. The analyst comments that Yahoo spinning off its core business instead of Alibaba will “yield the same tax free result previously expected in the discontinued Alibaba spin, but with the remaining YHOO shares comprised of just the BABA and Yahoo! Japan assets.” Overall, Munster believes that spinning off Yahoo’s core business “may be a cleaner way to achieve the tax free outcome than the previously proposed Alibaba spin.”
Munster has a 70% overall success rate recommending stocks with a +24.5% average return per rating when measured over one year with no benchmark. According to the 25 analysts polled by TipRanks in the last 3 months, 13 are bullish on Yahoo and 12 remain on the sidelines. The average 12-month price target for the stock is $41.27, marking an 18% potential upside from current levels.