Thursday’s Notable Analyst Ratings: Apple Inc. (AAPL), Netflix, Inc. (NFLX)


U.S. stocks closed in the red today as the lack of details on economic policy during Donald Trump’s first press conference since election hit investor optimism and winded a post-election rally. Among the equities in analysts’ focus today are tech giant Apple Inc. (NASDAQ:AAPL) and video-streaming service Netflix, Inc. (NASDAQ:NFLX). Let’s take a closer look”

Apple Inc.

With Apple preparing to release its earnings report for the first fiscal quarter on Tuesday, January 31, 2017, RBC Capital analyst Amit Daryanani takes a more conservative stance.

Daryanani explains, “Heading into Dec-qtr print, we have adjusted our Dec-qtr and FY17 revenue estimates to reflect currency headwinds resulting from USD strength since November, partially offset by local price increases and f/x hedges. Also, our Mar-qtr adjustments reflect incremental production cuts that we understand AAPL has implemented recently to better manage their channel inventory. Our Dec-qtr revenue estimate is reduced by ~70bps while EPS is lowered by ~0.05 vs. prior estimate. Notably, revenue headwinds for AAPL could create gross margin headwinds as a result of AAPL’s USD-denominated costs, although hedges should partially offset some of the impact. Fundamentally, we remain positive on AAPL based on 1) potential for iPhone 8 super cycle, 2) continued growth in high-margin Services business, 3) new MacBook Pro product should revert Mac segment to y/y growth in CY17, 4) potential upside from Trump-onomics (taxes, cash repatriation), 5) attractive valuation (~8.5x EV/FCF).”

Daryanani reiterates an Outperform rating on Apple shares, with a price target of $125, which represents a potential upside of 5% from where the stock is currently trading.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Amit Daryanani has a yearly average return of 7.8% and a 67% success rate. Daryanani has a 14.1% average return when recommending AAPL, and is ranked #299 out of 4340 analysts.

Out of the 47 analysts polled by TipRanks, 38 rate Apple stock a Buy, 6 rate the stock a Hold and 3 recommend a Sell. With a return potential of 8.2%, the stock’s consensus target price stands at $128.75.

Netflix, Inc.

Morgan Stanley analyst Benjamin Swinburne reiterated an Overweight rating on shares of Netflix, with a price target of $150, which implies an upside of 16% from current levels. Emphasizing increased conviction in his bullish rating, Swinburne provided four main reasons why he believes the company’s subscriber growth will accelerate in 2017:

  • First, we believe Netflix churn will fall YoY both in the US and internationally and primarily in 2Q/3Q as it laps last year’s “un-grandfathering.” In our view, the price increases were not executed well, and may have exacerbated churn, which organically had been falling in years prior and we expect that trend to return in ’17.
  • Second, original programming appears to be highly correlated with engagement or time spent (time spent per member continues to grow despite launching into new int’l markets), which is highly correlated to churn. Original hours will reach 1,000 globally in ’17 from 600+ in ’16. In dollar terms, Netflix is likely to bring ~$2bn of original exclusive content globally to its members and expense nearly $3bn of total content in the US in 2017, continuing to outspend OTT peers and traditional networks.
  • Third, set-top distribution began recently on the two largest cable operators globally – Comcast and Liberty Global. Comcast has also licensed its platform (X1) to additional MVPDs (Rogers, Cox, Shaw, etc.). Should the X1 become the next-gen platform of choice in North America, it should help Netflix continue to scale.
  • Fourth, the ability to download Netflix content should help in the emerging markets launched just a year ago, where data caps are the norm.

According to TipRanks, analyst Benjamin Swinburne has a yearly average return of 11.7% and a 72% success rate. Swinburne has a 37.6% average return when recommending NFLX, and is ranked #352 out of 4340 analysts.