Analysts are outlining bullish pictures for two of the market’s biggest giants: Apple Inc. (NASDAQ:AAPL) and General Electric Company (NYSE:GE). One analyst notes some foreign exchange pressures, but maintains confidence in the greater iOS ecosystem for AAPL. Meanwhile, another analyst weighs in after hosting an investor dinner amid GE Capital’s structural shifts, believing this segment will be a key accelerator for organic revenue growth for the industrial giant. Let’s dive in:
Nomura analyst Jeff Kvaal is out with a research report on Apple with a closer look into consumer preference, the iPhone machine cycle, and the bigger iOS picture. As such, the analyst reiterates a Buy rating on shares of AAPL with a $135 price target, which represents an almost 23% increase from current levels.
For the analyst subscriber growth remains a strength for the tech giant, explaining, “We believe iOS gains vs. Android remain positive, if smaller, given 7 Plus constraints.”
Kvaal notes, “Consumer preference for the supply-constrained 7 Plus model has left 7 demand solid if uninspired and leads our unit estimates back toward consensus. FX headwinds lower our 2H17 gross margin assumptions. We believe the iOS ecosystem continues to expand; the iPhone 8 may launch into a sub base 45-50% larger than the iPhone 6 launched into,” he adds, even at a descending growth rate in IoS.
For the first fiscal quarter of 2017, the analyst had initially projected 78 million iPhones at $687, compared to consensus calling for 76 million at $680. However, presently, Kvaal looks to 76 million at $693 and has also pulled back on his 2017 fiscal year gross margin forecast of 40bps to 37.8%. This translates to a dip in EPS for the fiscal year of 2017 from $9.37 to $9.23, although Kvaal notes this still tops consensus at $9.01. Nonetheless, the analyst anticipates, ” EPS should comfortably surpass $10.00 in FY18.”
Ultimately, “iOS sub growth should ultimately smooth near-term concerns,” Kvaal concludes.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, five-star analyst Jeff Kvaal is ranked #355 out of 4,238 analysts. Kvaal has a 58% success rate and gains 10.1% in his annual returns. When recommending AAPL, Kvaal garners 5.6% in average profits on the stock.
TipRanks analytics demonstrate AAPL as a Strong Buy. Out of 35 analysts polled in the last 3 months by TipRanks, 29 are bullish on Apple stock, 5 remain sidelined, and 1 is bearish on the stock. With a return potential of nearly 29%, the stock’s consensus target price stands at $130.75.
General Electric Company
On the heels of a dinner meeting with senior management taking charge of the “new” GE Capital and after hosting an investor dinner on December 1st to shed light on resultant structural objective changes, William Blair analyst Nicholas Heymann maintains a bullish forecast.
As the industrial giant realigns to put a focus on business growth prioritized ahead of accelerated earnings growth, the analyst reiterates an Outperform rating on GE with a price target of $35, which represents a just under 12% increase from where the shares last closed.
A key takeaway for the analyst lies in GE’s shift, as “[…] GE has repositioned its remaining GE Capital industrial vertical finance businesses to drive organic sales growth independent of global GDP by facilitating third-party financing key infrastructure projects.”
When assessing the giant, Heymann contends, “GE Capital today is a very different animal. Its goal is to earn its WACC while accelerating the growth of GE Industrial’s organic sales. The challenge is to understand the safeguards it has implemented to inherently prevent skewed returns on the short- and long-term funding it arranges without recourse.”
Overall, “While the new GE Capital in some sectors such as power and healthcare competes in some regions with competitors for GE’s products, unlike competitors GE Capital believes its vertical finance are required to only undertake short- or long-term project financing that earn their cost of capital,” Heymann surmises.
Moving forward, the company has almost wrapped up its Project Hercules, which will enable GE to close approximately $200 billion worth in noncore financing portfolios, with hopes to collect essentially the whole $200 billion bundle by the close of 2016, compared to $186 billion present-day. Moreover, the company hopes to “run off” in the opening half of 2017 with $10 billion.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, three-star analyst Nicholas Heymann is ranked #1,667 out of 4,240 analysts. Heymann has a 64% success rate and realizes 3.2% in his yearly returns. When suggesting GE, Heymann yields 5.8% in average profits on the stock.
TipRanks analytics exhibit GE as a Buy. Based on 9 analysts polled by TipRanks in the last 3 months, 5 rate a Buy on GE, 3 maintain a Hold, while 1 issues a Sell. The 12-month average price target stands at $34.50, marking a 10% upside from where the stock is currently trading.