Why You Should Look Beyond Apple Inc.’s (AAPL) F3Q Earnings, Intel Corporation’s (INTC) Exciting New Server Launch Not a Barricade to Rivals


Apple Skirting Volatility, But Long-Term Looks Good with iPhone 8 Launch

Apple Inc. (NASDAQ:AAPL) is gearing up to deliver its third fiscal quarterly print for the year, but Goldman Sachs analyst Simona Jankowski believes all eyes will be more fixed to outlook before the buzzed-about iPhone 8 launch. The main problem from Jankowski’s standpoint is less about where she looks for the results to measures up, anticipating the tech giant will either meet or even “slightly” top consensus expectations. For the analyst, the issue points to fourth fiscal quarter guidance, which runs the risk to be “highly volatile,” particularly dependent “on the exact timing of the launch.”

However, in the long run, the iPhone 8 launch will save the day of any volatility that runs amiss and therefore, the analyst reiterates a Buy rating on shares of AAPL with a $170 price target, which represents a 16% increase from where the stock is currently trading. (To watch Jankowski’s track record click here.)

“While Apple typically launches in 2H Sep, the potentially significant redesign of the new phone has given rise to concerns that shipments could be delayed to October due to supply chain bottlenecks,” explains Jankowski, who is out offering three kinds of scenarios in her research note. Approaching the print, the analyst calls for revenue guidance to fall between $48 to $50 billion, a hair under consensus expectations calling for $50.5 billion, factoring for a September 29th launch. If guidance hits between $51 to $53 billion, the analyst believes a September 22nd launch would be well within reason. In the case of guidance dipping under $48 billion, for Jankowski, this would entail a probable pushback to an October launch.

Jankowski concludes, “Importantly, while the exact timing could increase near-term volatility, we recommend staying long Apple shares into the product cycle, as we see significant EPS upside in FY18, with GSe at $11.50 vs. cons. $10.48, driven by significantly higher ASPs for the new iPhone. Indeed, our latest consumer survey shows surprisingly little sensitivity to a potential $999 starting price for the new iPhone (p. 9), with demand actually strengthening relative to our last read in April. Also of note, we estimate that Apple’s iPhone installed base has more than doubled since the last ‘super cycle’ in FY15, while we expect units to be up only 5% since then. Lastly, we expect Apple to guide gross margins to 38-39% (cons. 38.2%), with the FX headwind moderating and even reversing in 2H.”

TipRanks analytics exhibit AAPL as a Strong Buy. Out of 32 analysts polled by TipRanks in the last 3 months, 25 are bullish on Apple stock while 7 remain sidelined. With a return potential of 12%, the stock’s consensus target price stands at $163.77.

Intel’s Purley/Skylake Server Platform Not Enough to Keep Sharks Away

After attending the Intel Corporation (NASDAQ:INTC) server platform launch event in New York, top analyst Matt Ramsay at Canaccord sees “no surprises” here, coming away blown away by the chip maker’s performance capabilities. However, the analyst remains sidelined nonetheless, even with the launch of the company’s new Purley/Skylake server platform showcasing upgraded data center platform features, keeping a watchful eye on the others on the chip giant leaderboard.

Even though the launch event satisfied the analyst’s expectations, the analyst fears Intel does not have enough tricks up its sleeve to make it absolutely “impervious to new competition,” reiterating a Hold rating on INTC with a price target of $38, which represents a just under 11% increase from where the shares last closed. (To watch Ramsay’s track record click here.)

Ramsay fears that DCG growth stepping up its game to the double-digit arena, which is what the Intel team is modeling in its outlook presents a road not without thorns. While the Core X-series of desktop processors coupled with Intel’s Purley/Skylake server platform are breathing a breath of fresh are all while strengthening the outreach of the chip maker’s “dominant portfolio at the high end of its served markets,” the analyst continues to veer on the side of caution, anticipating PC revenue to keep its gradual secular decrease and server growth rates to maintain a yearly sub-10%.

“In particular, we model PC sales down ~3.6% in 2017 and down ~3.0% in 2018 in a largely flat TAM and believe these slow declines are actually a testament to Intel’s strong portfolio and expanding desktop ASPs as sales should prove largely resilient as AMD launches its first n-node Ryzen desktop and notebook products this year. Combined with the launch of certain 10nm notebook products and the new Skylake/Purley server platform, we anticipate stronger 2H/17 results for Intel overall. However, while we concede Intel shares generate a strong yield and remain inexpensive, we believe shares could remain range bound as overall gross margins stagnate and until investors see proof that new investments in 10/7nm, FPGAs, auto, IoT and memory are capable of generating strong returns within a reasonable horizon,” contends Ramsay.

TipRanks analytics show INTC as a Buy. Based on 24 analysts polled by TipRanks in the last 3 months, 11 rate a Buy on Intel stock, 9 remain sidelined, and 4 are bearish on the stock. The 12-month average price target stands at $38.74, marking a 13% upside from where the stock is currently trading.