Nomura analyst Jeff Kvaal weighed in on Apple, explaining his view that iPhone SE faces the risk of being victim to cannibalization. Kvaal reiterated a Buy rating on the stock with a price target of $120.00.
The analyst explains the new iPhone SE launch has “proven more robust than expected.” He notes supply chain orders for the product are rising, while global lead times remain elevated.
However, Kvaal mentions these conditions may likely affect the iPhone as well. He elaborates, “We consider this a mixed blessing as the strength likely includes cannibalization of the ever-weaker iPhone 6s.”
According to the analyst, lead times in the U.S. and China in days before March rose 2-3 weeks by late April, where they remained constant. Findings show that Greater and the U.S. combined represent approximately 50% of sales. Kvaal depicts his optimism claiming, “We had initially anticipated 10–20mn in the SE’s first year; we now believe volumes will reach 30mn by year-end. Our checks imply that Apple has increased its production forecast.”
The analyst explains that the “soft overall demand” portrays cannibalization in the developed markets, however, he predicts China will prove resilient in this regard. Kvaal explains, “The SE strength, overall demand weakness, and our anecdotal work implies the SE is stealing 6s demand in developed markets. We believe the SE is reaching its intended market, first-time buyers, in China.”
The average analyst consensus for AAPL on TipRanks is Strong Buy, with 86% of analysts bullish, 11% of analysts neutral, and 3% of analysts bearish. All recommendations amounted to a 12-month average price target of $125.80, marking a 32.12% upside from where shares last closed.
NXP Semiconductors NV
In addition, Nomura analyst Romit Shah weighed in on NXP Semiconductors with a reiterated Buy rating and a price target of $100.00. The analyst provides an M&A analysis for the company, and offers his rationale for NXPI as a possible acquisition candidate.
Shah believes consolidation is an immediate catalyst for the company, in spite of earnings growth profile positioning NXPI to “consistently outperform.” He explains, “We believe that NXP stands out to large-cap suppliers such as Broadcom, Qualcomm and Texas Instruments that might be considering transformational acquisitions.”
The analyst notes that in regards to acquisitions, he believes NXP is more than qualified, as the company “checks all the boxes” in terms of criteria. Shah explains NXPI is the “fifth largest supplier by revenue,” has a solid earnings accretion based on operating leverage, interest expense and net operating losses, and has a total addressable market expansion with 40% of sales from automotive.
Additionally, Shah mentions, NXP has a “significant presence in worldwide channels, which is valuable from a cross-selling perspective,” and is “the market leader in several areas, including secure identification, MCUs, and mobile transactions.”
The analyst believes investors should view NXPI as a solid long-term investment, especially due to the company’s EPS growth. Shah explains, “per our estimation, EPS will increase from $5.50-6.00 in CY16 to $9.00-10.00 in CY18. If management executes, we believe the implied valuation discrepancy between NXP (9x) and comps (14-15x) is unsustainable.”
According to TipRanks, Shah is a 5-star analyst, whose recommendation succeeded 58% of the time, ultimately delivering a one-year average return per recommendation of 7.4%.
The average analyst consensus for NXPI on TipRanks is Strong Buy, with 94% of analysts bullish and 6% of analysts neutral. All recommendations amounted to a 12-month average price target of $110.86, marking a 23% upside from where shares last closed.