It could be an exciting week to be a tech investor, with Apple Inc. (NASDAQ:AAPL) on the threshold of a buzzed-about software developers conference that could bear a “high probability” chance for key hardware updates to the Apple-verse and Broadcom Ltd (NASDAQ:AVGO) enjoying the bullish wave that has followed a fantastic fiscal third quarter posted yesterday evening. Let’s dive in as Drexel Hamilton divvies details of enthusiastic expectations for hardware announcements from Apple and MKM explores Broadcom’s good chances to score significant upside to long-term margin targets:
Apple Brain and Muscle Lies in Hardware- Expect Updates Monday
Apple is gearing up for its Worldwide Developers Conference (WWDC) on Monday, a conference that may traditionally interest software developers, but the tech giant sometimes spins a hardware reveal twist onto the scene. Drexel Hamilton analyst Brian White is highly anticipating the conference, particularly considering it will be the first “special event” the giant has hosted yet. Therefore, White would not be shocked should Apple have some hardware product updates waiting in the wings and believes the giant will be “expanding the breadth and depth of Planet Apple.”
Ahead of WWDC 2017, the analyst reiterates a Buy rating on shares of AAPL with a $202 price target, which represents a just under 32% increase from where the stock is currently trading.
Noting that founder Steve Jobs always referred to hardware as the “brain and sinew” of Apple products, deeming software the “soul,” the analyst notes this will not be the first WWDC where Apple puts forward new hardware in the spotlight. Explaining his hunch that Apple is on the brink of hardware reveals, White notes, “For example, there have been a slew of media reports pointing to updates around the MacBook family and we believe this is a high probability event. Moreover, various media reports have highlighted the potential unveiling of a 10.5-inch iPad Pro, which we believe is plausible but not a given. Finally, the media has reported the possible unveiling of an ‘Echo-like’ home assistant supported by Siri, a potential dark horse of the event but with a lower probability of occurring.”
Furthermore, considering timing, “Apple traditionally updates iOS at WWDC and we expect this year will be no different with iOS 11 unveiled ahead of the iPhone 8 in September,” continues White, who concludes looking ahead to the giant’s footsteps into the artificial intelligence (AI) playing field. “We anticipate that AI will play a larger role with this release by leveraging enhanced capabilities around Siri. […] Given our view that the 5.8-inch iPhone 8 will come with 3D sensing technology, we expect some AR-related features to be integrated into iOS 11; however, Apple may choose to keep them under wraps until the new iPhone is unveiled,” the analyst surmises, likewise predicting the giant will give a nice operating system portfolio upgrade with macOS 10.13, tvOS11, and watchOS 4.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, five-star analyst Brian White is ranked #155 out of 4,567 analysts. White has a 63% success rate and garners 10.6% in his annual returns. When recommending AAPL, White yields 24.8% in average profits on the stock.
TipRanks analytics show AAPL as a Strong Buy. Out of 30 analysts polled by TipRanks in the last 3 months, 26 are bullish on Apple stock while 4 remain sidelined. With a return potential of nearly 8%, the stock’s consensus target price stands at $164.74.
Broadcom One of the Strongest Tech Companies of the Chip Maker Universe
Broadcom is maintaining its “operational excellence” stride after its strong fiscal third quarter showing yesterday evening, and MKM analyst Ruben Roy is taking notice. In reaction to the print, the analyst reiterates a Buy rating on AVGO while boosting the price target from $250 to $261, which implies a close to 4% increase from current levels. Not only Roy is enthusiastic about Broadcom’s momentum with investors sending shares accelerating 7% today.
For the third fiscal quarter, AVGO’s wired infrastructure, which makes up half of the chip giant’s sales saw a 3% year-over-year rise, with expectations for the strength to continue to carry over to mid-single digits thanks to cloud and data center demand and broadband products. Meanwhile, the giant’s wireless segment’s performance once again outperformed initial estimates from the management team, skyrocketing 45% year-over-year. Additionally, enterprise storage “remains surprisingly stable,” commends the analyst, experiencing a 36% year-over-year climb. Management anticipates “low single digit growth” for the next quarter.
“AVGO reported another solid quarter, beating expectations handily. Management noted that seasonal declines in the wireless segment were less than expected and more than offset by contributions from other segments. All segments, including wireless, increased on a year-over-year basis. Looking ahead to fiscal Q3, AVGO’s guidance is above expectations on seasonal wireless strength, albeit slower initially than AVGO has experienced in previous cycles, continued, and somewhat unexpected, strength in storage, and a stable wired communications environment. We continue to view AVGO as one of the strongest technology companies within the semiconductor universe and we believe that meaningful upside to the company’s longer-term margin targets is possible. We continue to expect AVGO’s valuation discount to the peer group average (~14.5x versus 18.9x) to narrow as management continues to execute on its longer-term strategy,” Roy contends.
According to TipRanks, four-star analyst Ruben Roy is ranked #504 out of 4,567 analysts. Roy has a 65% success rate and earns 10.9% in his yearly returns.
TipRanks analytics exhibit AVGO as a Strong Buy. Based on 17 analysts polled by TipRanks in the last 3 months, all 17 rate a Buy on Broadcom stock. The 12-month average price target stands at $273.40, marking a nearly 17% upside from where the stock is currently trading.