Top analyst Michael Walkley at Canaccord may have approached Apple Inc. (NASDAQ:AAPL) with some caution ahead of its second fiscal earnings, but the bull is now out boosting his target expectations on the titan. As it turns out, the big AAPL machine’s iPhone unit sales were not as bad as Wall Street nightmares had rumored them to be and Tuesday evening’s show has just made Walkley more confident.
In reaction, the analyst reiterates a Buy rating on AAPL stock while lifting the price target from $200 to $208, which implies an 18% upside from current levels.
For the second fiscal quarter, Apple posted revenue and EPS that aligned with the Street’s expectations, which Walkley attributes to “steady iPhone unit sales and record services revenue up 31% YoY.”
Wall Street had been angling for 52.5 million in iPhones from the company, with Apple serving up a solid 52.2 million iPhones, even if its average selling price (ASP) of $728 fell just under the Street’s $742. AAPL’s management team commended iPhone X sales as the best seller for Apple of its smartphones throughout every week of the second fiscal quarter. The company set the third fiscal quarter revenue guide between $51.5 to $53.5 billion, with a midpoint beating out consensus of $51.7 billion. From Walkley’s eyes, this translated to suggested iPhone sales of around 40.5 million units.
In the fall, the analyst looks for new OLED screen iPhones to hit the market and bring forth a sustained robust upgrade cycle for Apple- meaning better margin and ASP iPhones. Walkley believes the company’s iPhone franchise will lengthen a powerhouse of sales of more expensive iPhones through 2019; especially thanks to a mammoth installed base that the analyst bets shot above 635 million closing out 2017.
Walkley finds the company’s reveal of a new $100 billion buyback program to match expectations. Glancing ahead, the analyst angles for this to be executed throughout the course of the upcoming 12 to 15 months; especially while Apple shifts to a cash neutral position coupled with a 16% dividend boost to $0.73 per quarter.
Overall, “Management highlighted consistent results in every geography with the iPhone X the top selling iPhone each week of the quarter. In fact, management highlighted share gains during the quarter in China for both Mac and iPhone. Guidance for the June quarter is slightly above consensus due to ongoing expectations for steady iPhone sales and anticipated strong growth in Services revenue. We believe Apple’s ecosystem approach including an install base of over 1.3B devices globally is leading to record Services revenue, and we expect the higher-margin services revenue growth to continue outpacing total company growth. We believe Apple is likely to launch three new iPhones in September with possible lower price points and greater segmentation could lead to YoY unit growth in C2019,” cheers Walkley.
On back of the quarter, Walkley is raising his 2018 and 2019 iPhone shipment expectations. For 2018, Walkley jumps his forecast from 205 to 216 million and for 2019 from 217 to 218 million iPhone shipments. Calling for impressive services revenue growth waiting in the wings for the titan, the analyst likewise jumps his EPS expectations, dialing up his 2018 estimate from $11.38 to $12.09 and for 2019 from $12.52 to $12.97.
Michael Walkley has a very good TipRanks score with a 61% success rate and a high ranking of #89 out of 4,774 analysts. Walkley realizes 16.6% in his annual returns. When recommending AAPL, Walkley garners 26.0% in average profits on the stock.
TipRanks showcases AAPL as a tech titan Wall Street likes. Out of 29 analysts polled in the last 3 months, 17 are bullish on AAPL stock while 12 remain sidelined. With a return potential of 9%, the stock’s consensus target price stands at $193.04.