Analysts from Oppenheimer recently weighed in on tech giant Apple Inc. (NASDAQ:AAPL) and Cypress Semiconductor (NASDAQ:CY) after increased investor concern and management meetings at the CES, respectively. One analyst remains bullish on Apple despite short term concerns, while the other comments on Cypress’ growth going forward and recent demand challenges.
Analyst Andrew Uerkwitz of Oppenheimer recently weighed in on Apple, commenting on the company’s positioning. The analyst states that he generally believed Apple’s differentiated user experience would enable the company to “outgrow” the high end smartphone market, especially because the company was able to hold premium prices and maintain growth with PCs as the market slowed. For FY16 and FY17, the analyst lowered his overall revenue and EPS estimates to better reflect expected lower iPhone and iPad shipments, the latter of which he believes stems from “emerging market headwind and longer replacement cycles.”
Uerkwitz expresses concern regarding the quick transition of the smartphone market to the PC market, believing the smartphone market will grow at a slower rate. He states that if he is correct about this, “China sales will remain strong while the weakness will come from North America and Europe.” The analyst states that if Apple has product cycle challenges marked by slowing demand for iPhone 6s vs iPhone 6, all regions will suffer. While Uerkwitz remains concerned about Apple in the near term, other investors worry about “potential long-term degradation of Apple’s hardware business.”
He continues by stating that Apple is moving to a “recurring revenue-based model,” which is difficult for some investors to accept. He concludes, “As the technology sector is seeing increased volatility and headwinds in 2016, we prefer cash-generating, dividend paying, attractively valued stocks like Apple.” The analyst reiterates his Outperform rating but lowers his price target to $120 (from $155).
According to TipRanks’ statistics, out of the 32 analysts who have rated the company in the past 3 months, 25 gave a Buy rating while 7 remain on the sidelines. The average 12-month price target for the stock is $138.33, marking a 40% upside from where shares last closed.
Cypress Semiconductor Corporation
Analyst Shawn Simmons of Oppenheimer recently weighed in on Cypress Semiconductor following a meeting with company management at the CES in Las Vegas last week. The analyst stated that the meeting reflected weak demand and limited visibility, as the company’s Q3 earnings call suggested. However, the analyst states that “demand has not worsened, particularly in China,” which leads him to believe the company will meet consensus estimates for Q4 revenue and EPS.
Despite a lack of demand growth, the analyst pointed to increased design activity “across all markets,” with automotive product sales projecting the most growth going forward. He explains there is a growing $600 million backlog in this industry thanks to cross-selling opportunities. The analyst is also bullish due to expected GM growth and “CY’s commitment to returning cash to shareholders,” noting that “CY’s 5.2% dividend yield is one of the most attractive among all semiconductor companies.” The analyst believes CY’s recent 20% drop in share price is a compelling entry point for investors. He concludes, “We are attracted to CY’s sticky and stable business model with a focus of returning more cash to shareholders.” The analyst reiterates his Outperform rating on the company with a $14 price target.
Out of the 5 analysts polled by TipRanks in the last 3 months, all 5 who rated Cypress are bullish on the company. The average 12-month price target for the stock is $14.20, marking a 67% upside from where shares last closed.