Analysts from Piper Jaffray and RBC Capital weigh in on technology giant Apple Inc. (NASDAQ:AAPL) and online payment giant Paypal Holdings Inc (NASDAQ:PYPL), reflecting on upcoming Q2 earnings and a survey of payment platform One-Touch, respectively. One analyst projects long-term growth for Apple in spite of investor concern, while the other believes positive survey data represents a catalyst for PayPal’s stock.
Top analyst Gene Munster of Piper Jaffray explains his thoughts on Apple ahead of the company’s Q2:16 earnings report, which is set to release on April 25 after market close.
Munster predicts revenues of $52-$53 billion, in line with both consensus estimates of $52 billion and company guidance of $50-$53 billion. However, the analyst points to investor worry regarding “the long term health of the iPhone.” In the long run, though, he believes these concerns are unwarranted given estimates. He explains, “We believe the June guide being slightly below the Street, but in-line with buy side thinking would be viewed as a positive and should give investors more confidence to be overweight shares of AAPL going into the iPhone 7 cycle.” Furthermore, the analyst claims that lower than consensus company guidance should “de-risk” the stock prior to the September iPhone launch.
While the analyst cites improvement in iPhone growth declines as the “substance for multiple expansion,” he notes that some believe shares have already demonstrated all the multiple expansion ahead of the iPhone7 cycle. He refutes this view, explaining, “Our belief is that given the general uneasiness of investors about iPhone growth, the multiple has yet to fully expand.”
Munster addresses the general issue of how the company can sustain long term iPhone growth and revenue growth going forward. The analyst cites multiple catalysts for the stock in addition to the iPhone that keeps him hopeful. He states, “Beyond June, we believe the future of Apple remains bright with the shift to annual upgrade offerings, emergence of the Apple Watch, increased contribution from Services, and the potential for the Apple Car.”
The analyst reiterates an Overweight rating on the stock with a $172 price target. He states, “AAPL remains our top pick and investors should continue to own shares over the next six months.”
According to TipRanks, Gene Munster is ranked 4 out of 3,895 analysts. He has a 64% success rate recommending stocks with an average return of 19.3% per recommendation.
Out of all the analysts who have rated AAPL in the last 3 months, 92% gave a Buy rating while 8% remain on the sidelines. The average 12-month price target for the stock is $136.22, marking a 27% upside from where shares last closed.
Paypal Holdings Inc
Analyst Daniel Perlin of RBC Capital weighed in on PayPal following positive survey data by the company and comScore on its One Touch payment platform.
The study indicated that One Touch has doubled the conversion rates of more traditional platforms such as Visa. Specifically, the company’s conversion rates came in at 87.5% vs. Visa Checkout at 51.1% and more traditional models at 45.6%. He states, “We believe this key statistic supports our belief that the One Touch strategy/ solution bridges the gap from PYPL’s legacy browser-based model to a mobile first model.”
Diving deeper into the survey, Perlin notes that PayPal moved up 14.5 points from its conversion rate from a similar survey in 2H15. Related, PayPal also released a One-Touch info graphic showing impressive growth. The company displayed One-Touch usage of 21 million consumers vs. 10 million in December 2015 and 203 consumer markets compared to only 23 in December of 2015.
The analyst believes this positive data on One-Touch represents a first-mover advantage. He remarks that as consumers increasingly shift to mobile to make payments, “the ability to automatically be authenticated on your chosen device (mobile, tablet, browser) vs. requiring a login and password… meaningfully reduces the consumer friction points that have historically existed.”
Perlin also notes that this positive survey data reinforces his bullish investment view on the company. The analyst predicts long-term growth for the company as a result of a “compelling long-term market opportunity in digital commerce;” the company’s market leader position in e-commerce payments; increasing consumer shift to mobile; and margin expansion. He also notes that “the “secret sauce” of Venmo and PayPal Credit [allows] the company to increase the profitability of transactions inside the Paypal Network.”
The analyst reiterates an Outperform rating on the company with a $42 price target.
According to TipRanks, Daniel Perlin has an 82% success rate recommending stocks with an average return of 17.1% per recommendation. Out of all the analysts who have rated the company in the past 3 months, 57% are bullish, 4% are bearish, and 38% remain on the sidelines. The average 12-month price target for the stock is $42, marking a 7% upside from where shares last closed.