Piper Jaffray’s Betting on Apple with iPhone X Buzz Swirling
What happens if Apple Inc. (NASDAQ:AAPL) pushes back its iPhone X launch to the late fall or early winter? Not much, says top analyst Michael Olson at Piper Jaffray, who believes that even if the tech titan’s team puts forth guidance that is a little lackluster compared to consensus expectations, he does not believe this will ruffle shareholder’s feathers too much. Most in fact are counting on an iPhone units timing shift.
With the encouraging momentum of high iPhone X anticipation on the titan’s side coupled with strong services revenue growth, the analyst continues to sing Apple’s praises, reiterating an Overweight rating with a $158 price target, which represents a 5% increase from where the stock is currently trading. (To watch Olson’s track record, click here.)
Olson predicts Apple will deliver a “solid” fiscal third quarterly performance with a guide that will just “slightly” underperform consensus forecasts, pointing to a probable iPhone X launch delay for those who had been gearing up for September. In anticipation of the delay, the analyst has reduced his iPhone unit expectations for the fourth fiscal quarter by 4 million units, adding the same units instead to the first fiscal quarter of 2018. Accordingly, the analyst has tweaked his total revenue forecast for the third fiscal quarter downward by 4% and EPS projections have been trimmed by 2%.
Nonetheless, Apple’s frame is a secure one, as “[…] The setup for AAPL over the coming months appears favorable. While not anticipated by us, we believe any ‘hiccups’ in Jun results, would be glossed over as investors focus on the upcoming iPhone launch (late Fall ’17). We are adjusting our model to reflect the potential delay of next generation iPhones from the Sep to the Dec quarter. While launch timing for updated iPhones remains uncertain, industry chatter has been steadily emerging that suggests at least some models will not be available until Oct/Nov/Dec (vs. Sep). We are pushing 4M iPhones from the Sep to the Dec quarter. We recommend owning AAPL due to anticipation around iPhone X (aka iPhone 8) and a favorable services revenue trajectory,” opines Olson.
Ultimately, the analyst concludes that even a postponed iPhone launch will not be Apple’s undoing with the long-term looking so robust for the titan, underscoring, “We do not expect investors will be overly unnerved by an outlook that is slightly below consensus, given the widespread news flow around potential for next gen iPhone delays.”
TipRanks analytics demonstrate AAPL as a Strong Buy. Out of 32 analysts polled by TipRanks in the last 3 months, 24 are bullish on Apple stock while 8 remain sidelined. With a return potential of nearly 10%, the stock’s consensus target price stands at $164.67.
Amazon’s Earnings Story: Strong Growth Prospects vs. Retail Risks
In a less confident consumer atmosphere, KeyBanc analyst Edward Yruma sizes up the market share advantage for Amazon.com, Inc. (NASDAQ:AMZN) from a cautiously optimistic light. Commending the online auction and e-commerce leader’s forward traction in the retail-verse as viable, strategic long-term plays, further share gains seem likely for Amazon from Yruma’s eyes.
In a largely positive second-quarter earnings preview ahead of Thursday’s expected print, the analyst surveys the stock safely from the sidelines, reiterating a Sector Weight rating on AMZN without suggesting a price target. (To watch Yruma’s track record, click here.)
“We think Amazon.com should post solid results despite a still tentative consumer. The Company has made a number of muscle moves in retail (Prime Wardrobe, Whole Foods, Kenmore appliances) that will serve as long-term growth drivers. FC growth in 2H16 likely pressured fulfillment expense, but revenue growth is likely similar to 1Q. For AWS, our conversations with AWS partners suggest growth could reaccelerate in 2Q.”
Even amid retail challenges, Yruma forecasts core retail products business to be a “bright spot” for Amazon in its market share-capturing trajectory. Compared to this time last quarter, the analyst forecasts a 15% year-over-year rise, adding that “[…] growth at third-party and subscription services should maintain a significantly faster growth rate.”
Projecting Amazon Web Services (AWS) revenue has the chance to kickstart growth once again, the analyst projects a surge past $4 billion for the company, Yruma surmises, “AWS partners suggest growth could reaccelerate in 2Q. Favorable partner feedback on a seasonal recovery at AWS was encouraging after a sluggish 1Q, where growth slowed to the lowest levels since mid-2014. […] Competition with Microsoft and Google has increased, but does not appear to be derailing AWS’ strong cloud growth prospects.”
TipRanks analytics indicate AMZN as a Strong Buy. Based on 27 analysts polled by TipRanks in the last 3 months, 25 rate a Buy on Amazon stock while 2 maintain a Hold. The 12-month average price target stands at $1,135,18, marking a nearly 11% upside from where the stock is currently trading.