Analyst Sees Sunny Skies for Apple (AAPL) Stock Ahead of Q3 Earnings


Like a pole vaulter lifting his legs just an inch higher to get over the bar, analyst Robert Cihra from Guggenheim predicts Apple (AAPL) is going to kick up revenue for the third quarter. Cihra’s revenue estimate for Q3 is $61.9 billion, showing a year-over year-increase of 18% with an EPS of $2.80. Newer and more expensive models of iPhones are what guide the analyst to make the leap.

“While “growth via ASP” was news a year ago but less so today, we nevertheless still see two remaining drivers: 1) upside in the new larger-screen 6.5-inch iPhone XS Max ($1099), satisfying demand after a Plus-sized X was sorely missed last year when OLED panels were tight, and 2) our expectation for the new 6.1-inch iPhone XR ($749), which starts shipping Oct 26, to be ASP dilutive vs. the XS/Max BUT bring enough new LCDmodel improvement (e.g., 20% bigger screen, “notch” for 3D sensing/Face ID, dual-SIM, new range of colors) that it can ship ~50% more units than the combined total of last year’s iPhone 8+8 Plus,” Cihra said.

Though Cihra has his faith behind Apple stock and behind Apple products, he doesn’t want to be naïve. The analyst says he sees more risk in the iPhone’s average selling price (ASP) this year versus last: “We see more risk in iPhone ASP this year vs. last, needing to lap FY18E’s historical +17%Y/Y and IF the new XR (i.e., priced $749 at the average of a prior-gen 4.7” iPhone 8’s $699 and 5.5” 8 Plus’s $799; with cheaper LCD vs. OLED, single-lens camera and casing vs. the XS) pulls demand mix down from the higher-priced XS/Max. However, we think history shows a better likelihood the XR rather pulls demand UP from cheaper prior-gen 7 and 6 class buyers, driven by Apple’s highend demographic and peel-off-the-top model,”

Bottom line, Cihra reiterates a Buy rating on AAPL stock with a price target of $245, which implies an 11% upside from current levels. (To watch Cihra’s track record, click here)

Most on the Street are largely bullish on the iPhone maker’s stock, with TipRanks analytics demonstrating AAPL as a Buy. Based on 35 analysts polled in the last 3 months, 24 rate a Buy on Apple stock, 10 issue a Hold, while only 1 recommends a Sell. The 12-month average price target stands at $242.76, marking a 13% upside from where the stock is currently trading. (See AAPL’s price targets and analyst ratings on TipRanks)

 

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