Credit Suisse analysts are confident on Apple Inc.(NASDAQ:AAPL) and Microchip Technology Inc. (NASDAQ:MCHP) shares this week, between Apple’s WWDC that showcased some computing platform flourishes forward for the tech giant and Microchip’s encouraging preannouncement setting higher expectations for revenues and earnings for the fiscal year of 2018.
One analyst notes that while many investors always feast their attention on the conference known to put the latest software upgrades on display, this year brought notably bigger improvements to the table in terms of OS, with the giant sharpening its competitive advantage in the process. Likewise, another analyst is encouraged with Microchip’s updated outlook, pointing out that the only fear investors should have is of waning growth- and not of a downturn, as the chip maker is set to continue to capture market share. Let’s take a closer look:
Apple Portfolio in Good Standing Beyond 2017
On Monday, Apple hosted its annual Worldwide Developers Conference in San Jose California, offering iOS, tvOS, macOS, and watchOS upgrades Credit Suisse analyst Kulbinder Garcha praises as “highly anticipated,” as the tech giant keeps upping its competitive software game.
On the heels of an innovative conference, the analyst reiterates an Outperform rating on shares of AAPL with a $170 price target, which represents a just under 10% increase from where the stock is currently trading.
One computing platform enhancement Garcha commends is the giant’s new voice control device, an intelligent home speaker called HomePod run by an A8 chip along with a better Siri program. This could be a solid strategic “software edge” move, as the analyst asserts, “The speaker is positioned to compete with Amazon’s Echo and Google’s Home. However we believe it has more emphasis on music and speaker attributes, as Home Automation and third party apps have yet to be fully incorporated.”
Likewise, the analyst points to various OS developments, including “a major upgrade on iOS 11,” from improvements in Siri, messaging, the App Store, the control center, the Maps app, Apple Music, among other features that will bolster productivity and better protect privacy- a far “more significant update than usual,” from Garcha’s stance.
“Additionally, across the portfolio we begin to see the payoffs of the company’s multi-year investments in Machine Learnings and Augmented Reality as well as improvements to the iPad line-up, Apple Pay and Siri, in addition to a new intelligent home speaker – HomePod. We believe ahead of the iPhone 8 Super-Cycle (see our note: 8 Super-cycle – Rising Demand, Rising Price), this positions the portfolio well for 2H17 and beyond,” Garcha contends. Projecting that while valuation approach evolutions “may take time,” when taking under account the rise of the Services segment and a projected long-term installed base to circle 1.5 billion, the analyst angles for an annuity like free cash flow to be “sustainable” at roughly $75 billion long-term.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Kulbinder Garcha is ranked #446 out of 4,571 analysts. Garcha has a 57% success rate and gains 8.2% in his yearly returns. When recommending AAPL, Garcha earns 21.9% in average profits on the stock.
TipRanks analytics show AAPL as a Strong Buy. Out of 31 analysts polled by TipRanks in the last 3 months, 26 are bullish on Apple stock while 5 remain sidelined. With a return potential of 6%, the stock’s consensus target price stands at $164.39.
Microchip Technology Has Strong Defense and Offense
Microchip Technology sees fit to boost its fiscal first quarter guidance for 2018 and top analyst John Pitzer at Credit Suisse is bullish on the positive pre-announcement, reiterating an Outperform rating on MCHP with a price target of $90, which represents a close to 6% increase from where the shares last closed.
On Monday evening, the chip maker’s management team took revenue outlook from a range of $921 million to $966 million up to $943 million to $957 million
Pitzer emphasized an important upside for margins, even without an update offered on ATML accretion, elaborating, “[…] MCHP noted that upside resulted from both MCHP-specific initiatives and strong industry conditions, supportive of both continued upside to MCHP GM/OpM of 60%/37% towards recently revised targets of 62.5%/40%, as well as modest upside to C2Q Rev estimates for Semis that are in-line with seasonal.”
Meanwhile, “MCHP once again noted that the business environment remains strong, internal/distributor inventory remains low and lead times are lengthening – while we feel obliged to remind investors y/y growth is set to peak in May, we see only a slowing in growth and not a contraction. We see a foundation for LT Semi Rev growth above nominal GDP for the first time since the late 1990s, with the sector trading at a 20% discount to the SPX on EV/FCF,” continues the analyst.
Ultimately, Microchip is in strong standing, and Pitzer maintains a bullish perspective, surmising, “We continue to note that MCHP has both organic and inorganic growth opportunities which give it both defensive and offensive characteristics, offsetting cyclical risk – current scale should help profitability and market share growth”
John Pitzer has a very good TipRanks score with a 73% success rate and a high ranking of #59 out of 4,571 analysts. Pitzer garners 20.7% in his annual returns. When recommending MCHP, Pitzer collects 31.6% in average profits on the stock.
TipRanks analytics exhibit MCHP as a Strong Buy. Based on 11 analysts polled by TipRanks in the last 3 months, 10 rate a Buy on Microchip stock while 1 maintains a Hold. The 12-month average price target stands at $95.50, marking a 12% upside from where the stock is currently trading.