Two analysts have done their research on Apple Inc. (NASDAQ:AAPL) and Netflix, Inc. (NASDAQ:NFLX), with Needham exploring concerns behind the Asia supply chain scenes that could result in speed bumps for the iPhone 8 launch and FBR questioning where Netflix can go next after achieving peak growth. Let’s dive in:
Apple iPhone 8 Hits a Hitch in the Plans
Top analyst Rajvindra Gill of Needham offers takeaways on Apple after hosting an investor call with Truly Holdings COO James Wong. A key insight divulged in the meeting points to assembly challenges between OLED and dual camera technologies that could lead to a stalled iPhone 8 launch.
Gill highlights, “Truly gave us insight into the Chinese smartphone demand environment at Huawei, Oppo, and Vivo which could be flat to up 10% Y/Y compared to previous expectations of up 20% Y/Y entering 2017 – resulting in a potential component overbuild. OLED and Dual Camera adoption within China will be largely dependent on Apple’s iPhone 8 success (as Chinese OEMs are fast followers). Importantly, Truly noted that assembly issues are causing a potential iPhone 8 delay. However, we still expect iPhone 8 to be announced in Sept, but availability could be pushed out. Apple could likely delay the introduction of 3-D sensing technology to 2H18 for the iPhone 8S (Chinese OEMs to ramp in 1H18).”
On a positive note, “Apple is also under less pressure to release early due to current weakness at Samsung,” Gill concludes, noting that Apple could hold off on 3-D sensing until the second half of 2018, possibly opting to have a revamped iPhone 8s model with the new technology rather than on the forthcoming iPhone 8.
Rajvindra Gill has a very good TipRanks score with a 68% success rate and a high ranking of #44 out of 4,560 analysts. Gill garners 18.1% in his annual returns. When recommending AAPL, Gill gains 45.2% in average profits on the stock.
TipRanks analytics demonstrate AAPL as a Buy. Out of 38 analysts polled by TipRanks in the last 3 months, 29 are bullish on Apple stock, 7 remain sidelined, and 2 are bearish on the stock. With a return potential of nearly 8%, the stock’s consensus target price stands at $152.87.
Netflix’s Reached a Peak- But Is This Bad?
After investigating Google search volumes as a worldwide gauge to see where Netflix stands, FBR analyst Barton Crockett believes the video streaming giant’s first quarter subscriber guidance for 2017 “makes sense,” pointing to a picture painting a domestic net adds “dip” coupled with an uphill battle on the international front against steep comps.
Therefore, the analyst reiterates a Market Perform rating on shares of NFLX with a $144 price target, which represents a just under 1% downside from where the stock is currently trading.
Crockett elaborates, “We see this as only a rough gauge, but an interesting one, given the broad global footprint of Google. We do not have the detailed disclosures from Netflix to see if there is a mathematical correlation. But, in general, we believe that if more people are signing up for Netflix, more people are likely to use Google to search for ‘Netflix,’ and the inverse would be true if the number of new users coming to Netflix were waning.”
Ultimately, “We see Netflix currently at peak growth (in both subs and revenue growth), and that concerns us for a growth stock trading at 49x EV/ EBITDA and a P/E of over 100x. Bulls have spoken of Netflix as a replacement for the pay TV bundle. But consumer behavior says it is a supplement. Almost everyone who gets Netflix also has a pay TV service. That said, the trajectory of consumer interest seems steady and robust, and Netflix executes well. If the company is able to perform near its guidance for subscriber growth, which we expect, the stock, we believe, will tend to be OK or better,” Crockett surmises.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, five-star analyst Barton Crockett is ranked #353 out of 4,560 analysts. Crockett has a 62% success rate and realizes 8.1% in his yearly returns. When recommending NFLX, Crockett yields 12.0% in average profits on the stock.
TipRanks analytics indicate NFLX as a Buy. Based on 35 analysts polled by TipRanks in the last 3 months, 21 rate a Buy on Netflix stock, 13 maintain a Hold, while 1 issues a Sell. The 12-month average price target stands at $155.13, marking a 7% upside from where the stock is currently trading.