Strong Apple Inc. (AAPL) FQ1:18 Guide and Rising ASPs Are a Big Bullish Sign for Shares Approaching 2018

GBH Insights: China will be a key ingredient to Apple's success circling iPhone X supercycle.


Apple Inc. (NASDAQ:AAPL) shares are rising almost 3% in pre-market trading today after the tech titan showed a pleasantly surprised Wall Street its official iPhone X launch today is not the only excitement up the company’s sleeve. While the Street rumor mill was fully prepared to gloss over the Apple machine’s fourth fiscal results, the titan pulled an ‘abra cadabra’ financial showdown last night: a “blow out” quarterly outperformance.

GBH Insights analyst Daniel Ives looks ahead to a “trillion dollar market cap [that] could finally be on the near-term horizon,”

Finding that the company turned over quite “a positive surprise with most investors expecting a ho-hum quarter but nothing spectacular as the build-up for the iPhone X begins,” the analyst is quite impressed with the beat, reiterating a Highly Attractive rating on AAPL stock while setting a valuation target between $190 and $200, which implies a close to 10% increase to a just under 16% increase from current levels. (To watch Ives’ track record, click here)

For the fourth fiscal quarter, Apple “handily beat” consensus with $52.6 billion in revenue against the Street’s $50.7 billion and pro forma EPS of $2.07 trouncing the Street’s $1.87. Even iPhone units of 47 million soared a bit past the Street’s projection looking for 46 million, which is impressive considering “iPhone 8/8+ sales appeared soft out the gates.”

Ives takes it in full bullish stride to see “all product categories coming in ahead of expectations,” deeming this “a positive sign heading into the company’s crucial iPhone X launch.”

For those who questioned how Greater China would treat Apple, it turns out revenue in this area was a real dark horse in helping the titan’s earnings triumph: “China was the star of the quarter with revenue of $9.8 billion, which was up 12% year over year and 22% sequentially. We believe this crucial region appears to be finding its sea legs again and is the main ingredient in Apple’s recipe for success around iPhone X upgrades during 2018 with our estimate of 60 million+ Chinese consumers ready for a potential upgrade over the next year,” writes the analyst.

“Most importantly” to Ives is the first fiscal quarter guide for 2018, with the AAPL team expecting total revenues of $84 to $87 billion, slightly past the Street’s $85.2 billion when looking at the midpoint. As far as the analyst assesses the bigger iPhone X picture, “This would imply strong iPhone X demand (Street whispers in the 75 million to 80 million range) and a significant uptick in ASPs for the December quarter, which is a major bullish sign for the stock heading into 2018,” leaving Ives quite confident on “key” iPhone X demand.

Where is Wall Street placing its chips in the tech-verse? It looks like Apple is an analyst favorite, considering TipRanks analytics exhibit AAPL as a Strong Buy. Out of 28 analysts polled by TipRanks in the last 3 months, 22 rate a Buy on Apple stock while 6 maintain a Hold. The 12-month average price target stands at $179.44, marking a nearly 7% upside from where the stock is currently trading.