Drexel’s Brian White Shares Two Cents On Apple Inc. (AAPL) 3Q:FY17 Earnings

Apple Inc. (NASDAQ:AAPL) investors are certainly loving the latest numbers posted by the tech giant, sending shares up nearly 6% in after-hours trading.

For the fiscal third-quarter, Apple reported total revenues of $45 billion (up 7% Y/Y) in-line with consensus while its EPS of $1.67 came in above consensus of $1.57. The company’s gross margin of 38.5% was slightly ahead of consensus of 38.2% and ended up toward the upper-end of management’s outlook of 37.5-38.5%. Looking forward, Apple guided F4Q17 revenue toward the $49-52 billion range while gross margin is expected to be between 37.5-38.0%. This compares with consensus of $49.2 billion and 38.3%, respectively.

In a research note reviewing today’s Apple earnings announcement, Drexel Hamilton analyst Brian White reiterated a Buy rating on Apple shares, with a price target of $202, which represents a potential upside of 35% from where the stock is currently trading. (To watch White’s track record, click here)

White commented, “Apple’s iPhone unit sales of 41.03 million (up 2% YoY) beat our estimate of 39.95 million. For the iPad, units of 11.4 million handily beat our 8.0 million projection with the launch of new iPad Pros, while Mac unit sales of 4.29 million units nearly met our 4.33 million projection. Services revenue of $7.27 billion grew by a strong 22% YoY and beat our $7.04 billion estimate. Greater China revenue fell by 10% YoY in 3Q:FY17 but better than our down 15-20% estimate.”

“We are very pleased with Apple’s 4Q:FY17 outlook that is above our projections and the Street […] Using the midpoint of Apple’s 4Q:FY17 outlook, we calculate EPS of approximately $1.84 (Street is at $1.82). We are projecting 4Q:FY17 sales of $49.30 billion and EPS of $1.71,” the analyst continued.

The bottom line: “With the June quarter out of the way, we believe investors will quickly turn their focus to the iPhone 8 this fall, along with the company’s capital distribution initiative, depressed valuation and new innovations showcased at WWDC. We still believe Apple remains among the most underappreciated stocks in the world.”

Out of the 34 analysts polled in the past 3 months, 26 are bullish on AAPL stock, while 8 remain sidelined. With a return potential of nearly 10%, the stock’s consensus target price stands at $164.93.


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