Goldman Sachs and Loup Ventures are out with opposite perspectives on two tech leaders: Advanced Micro Devices, Inc. (NASDAQ:AMD) and Apple Inc. (NASDAQ:AAPL). One analyst casts serious reservations as to AMD’s ability to sustain earnings in the long-term, questioning the driving ability of cryptocurrency mining as translating to earnings growth in the long-term. Conversely, Apple expert Gene Munster wagers that this time around, the newest iPhone cycle is attracting more interest than before, attributing a rise in buying intent to the iPhone 8’s augmented reality capabilities. Let’s take a closer look:
We Would Sell Advanced Micro Devices, Says Goldman Sachs
Advanced Micro Devices is no match for its rival Nvidia from the eyes of Goldman Sachs analyst Toshiya Hari who is out with a pessimistic report on the chip giant, doubting whether there are enough EPS catalysts in the fire for the long-term.
Therefore, the analyst reiterates a Sell rating on shares of AMD with a $10.60 price target, which represents an 11% downside from where the stock is currently trading.
Hari notes, “While this dynamic may provide near-term upside to fundamentals, we believe it is unlikely to become a sustainable driver of EPS […]” pointing to a three-point bearish case: “1) Rising cryptocurrency prices does not equate to sustainable GPU growth […] 2) Rising cryptocurrency does not equate to sustainable ASP expansion […] 3) Rising cryptocurrency prices does not equate to sustainable share gains.”
“Bottom line, we would Sell the stock with 14% potential downside to our unchanged 12-month price target of $10.60. The cryptocurrency mining dynamic could potentially provide a nice tailwind in the short-term, but the stock still, in our view, is already pricing in a significant improvement in market share and bottom-line profitability (i.e., higher GMs + opex leverage). For those looking to gain exposure to secular growth markets such as gaming, VR and data center acceleration, we would continue to recommend buying/owning NVDA (Buy, also on CL),” concludes Hari, who dismisses cryptocurrency mining to have enough power to drive EPS down the road for AMD.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Toshiya Hari is ranked #438 out of 4,567 analysts. Hari has a 75% success rate and yields 25.5% in his annual returns. However, when recommending AMD, Hari faces a loss of 4.2% in average profits on the stock.
TipRanks analytics exhibit AMD as a Hold. Out of 18 analysts polled by TipRanks in the last 3 months, 6 are bullish on AMD stock, 9 remain sidelined, and 3 are bearish on the stock. With a loss potential of 2%, the stock’s consensus target price stands at $11.67.
Apple’s Newest iPhone (and AR Features) Attracting a Surge in Interest
Gene Munster – imparting his take on the tech giant from his new research-driven, venture capital firm Loup Ventures – believes intrigue is compelling for Apple’s 8th iPhone release, even more so than for the iPhone 7 this time last year.
One weekend before the annual Worldwide Developers Conference, the analyst had polled 501 domestic consumers to gauge their level of interest in purchasing the iPhone X, anticipated for a fall launch. When assessing this potential base of iPhone buyers, 220 presently use an iPhone, and a quarter of them intend to buy the newest model at the release- a 2% rise from Munster’s March survey, and a 10% boost compared to this time last year (when Munster still was a part of the Piper Jaffray team).
Perhaps a key reason for greater intent to upgrade lies in interest in augmented reality, as the analyst elaborates, “When asked about augmented reality features, interest is high among those expecting to purchase the next iPhone (even though this survey was conduct before Apple’s ARKit announcement on June 5th).”
Over half of the respondents underscored AR as a reason to buy the iPhone X, more than doubling the results from Munster’s March survey. For those not eyeing the iPhone X, it is worthy of note AR interest also is not a priority, with only 14% expressing intrigue. Especially among Android users, a mere 20% of 501 consumers polled noted they care about AR features.
Munster opines, “2017 iPhone Should Mark A Step Up In iPhone Growth,” asserting, “The increase in iPhone growth from the coming iPhone cycle is already factored into shares of AAPL.” While the analyst comments iPhone unit growth was at 0% for the iPhone 7, he calls for 8% for the iPhone 8, believing revenue will rise from flat for the iPhone 7 to 11% for the upcoming iPhone 8. Revenue growth in fact could outclass unit growth, which Munster sees as a reflection of a lift in ASP from $651 to $674, thanks to higher-end 3D features.
Moreover, “Based on a recent conversation with a component supplier, we now expect the new iPhone to be announced in Sept. and ship in Oct. given challenges with the OLED curved screen,” continues the analyst, projecting a shortfall of 10 million units to 39 million, calling for a 6 million shift to the holiday quarter and 4 million into the spring of next year. Apple should find “supply demand equilibrium” by the March quarter of 2018 for its iPhone cycle.
Ultimately, “We have been referring to the next iPhone as ‘iPhone X’; however, Apple has been simplifying their naming schemes across product lines (e.g., ‘iPad’ and ‘iPad Pro,’ dropping the numerical value to show its position in the lineup). All that to say, we now think Apple will refer to the new iPhone as ‘iPhone’ and ‘iPhone Plus,'” Munster concludes.
TipRanks analytics demonstrate AAPL as a Strong Buy. Based on 31 analysts polled by TipRanks in the last 3 months, 26 rate a Buy on Apple stock while 5 maintain a Hold. The 12-month average price target stands at $165.04, marking a 13% upside from where the stock is currently trading.