Top analyst Michael Olson at Piper Jaffray is placing odds on two kings of the tech world despite short-term concerns that have cropped up recently: Apple Inc. (NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN). Apple sentiment has been impatiently fixated on the forthcoming release of the 8th iPhone version, leading the company’s impressive third fiscal quarter report to march in with a sweet surprise: beats largely across the board, including outlook- which to Olson means any launch delay misgivings are inflated. Meanwhile, though Amazon’s stock has been waning since it posted last Thursday second-quarter earnings that tripped over a gaping earnings miss, the analyst remains unfazed, highlighting a stellar buying opportunity at hand.
Michael Olson has a very good TipRanks score with a 67% success rate and a high ranking of #64 out of 4,625 analysts. Olson garners 17.7% in his annual returns. When recommending AAPL, Olson earns 14.5% in average profits on the stock. When suggesting AMZN, Olson gains 11.2%.
Let’s dive in:
Apple iPhone X Launch Delay Concerns Are Overblown
Apple shares were on an almost 5% take-off yesterday and are still flying today after the tech titan released an earnings beat Tuesday evening that took the Street pleasantly off guard. Considering this is a time everyone has been anxiously awaiting the iPhone X launch, Apple’s illustrious decade anniversary edition since its first iPhone took the world by storm, no one was expecting such a strong fiscal third quarter print.
Likewise, in addition to an EPS beat, the titan’s posted fourth fiscal quarter guidance for revenue also exceeded expectations, and Olson sees this as a positive that misgivings regarding rumored delays for the iPhone 8 release date are not going to be slowing this titan down.
In reaction, analyst reiterates an Overweight rating on shares of AAPL while hiking the price target from $158 to $190, which represents a just under 21% increase from where the stock is currently trading.
All eyes have been glancing ahead to the iPhone X, and Olson believes all this buzz coupled with encouraging momentum pushing services revenue make this stock one investors should feel compelled to buy.
For the third fiscal quarter, the titan’s EPS outperformed consensus by 6%, with revenue topping consensus by 1%. Additionally, iPhone units of 41.0 million hit ahead of consensus of 40.7 million, with services revenue of $7.27 billion handily beating the Street’s $7.07 billion. Gross margin of 38.5% edged ahead of consensus of 38.3%. Guidance for fourth fiscal quarter revenue outperformed consensus by 3% with gross margin outlook as the only part of the print under the Street’s expectations.
From Olson’s eyes, “Sept quarter revenue guidance is nicely above consensus, which, in our view, is the primary driver for AAPL shares reacting positively to the earnings report; we believe most investors had grown concerned that an iPhone X delay (or limited initial availability) would hamper the outlook. This did not prove to be the case.”
Ultimately, “Our view is that AAPL is well positioned near-term as proximity to iPhone X will capture investor attention and concerns of a delayed or limited availability iPhone X should begin to fade. Apple management once again indicated that, despite reporting higher June quarter iPhone units than expected, they believe iPhone is being negatively impacted by rising awareness of the upcoming device. This commentary suggests that the upcoming device is likely to see a more robust uptake rate than previous iPhone cycles, except perhaps the iPhone 6 launch,” Olson contends with a solid vote of confidence that “We recommend owning AAPL […]”
TipRanks analytics demonstrate AAPL as a Strong Buy. Out of 34 analysts polled by TipRanks in the last 3 months, 26 are bullish on Apple stock while 8 remain sidelined. With a return potential of nearly 9%, the stock’s consensus target price stands at $170.77.
Amazon Primed to Capture Grocery Delivery Market Share
After surveying 1,366 domestic consumers as to their grocery shopping preferences and readiness to purchase items in-store vs. online through delivery and/or click and collect (ordering online and collecting the merchandise at a local store), how does Olson size up Amazon? From bullish conviction, it turns out, as Olson expects that particularly following the online auction and e-commerce leader’s Whole Foods acquisition, the company is in great standing for future market share gains.
Therefore, on back of the survey that revealed more than 15% of U.S. consumers intend to use grocery delivery this year, the analyst reiterates an Overweight rating on AMZN with a $1,200 price target, which represents a 20% increase from where the shares last closed.
Olson asserts, “We found that, not surprisingly, nearly all consumers intend to shop in-store in 2017, but 16% also intend to use delivery services, while 11% will buy via click & collect. Millennials, for once, are not ahead of all other age groups for adoption; our survey showed the most interest for delivery and click & collect coming from 35-54 year olds. As the percentage of consumers that become comfortable with buying groceries online grows, we believe Amazon will be well positioned to capture share, through both the company’s existing initiatives and, to an even greater extent, the Whole Foods acquisition. Beyond being just a beneficiary, Amazon will be a major driver of this heightened adoption, through significantly improved offerings compared to currently available services.”
Overall, the analyst anticipates “This bodes well for Amazon as the company (via Whole Foods and internal efforts) continues to push towards a more ubiquitous grocery delivery offering,” concluding with the recommendation to buy Amazon shares: “We believe weakness around margin-related misses can prove to be good buying opportunities.”
TipRanks analytics show AMZN as a Strong Buy. Based on 30 analysts polled by TipRanks in the last 3 months, 28 rate a Buy on Amazon stock while 2 maintain a Hold. The 12-month average price target stands at $1,163.12, marking a nearly 17% upside from where the stock is currently trading.