Analysts are confident on three of the tech-verse’s biggest stock players, Apple Inc. (NASDAQ:AAPL), Facebook Inc (NASDAQ:FB), and International Business Machines Corp. (NYSE:IBM). From AAPL’s increasing capture of industry profits in the global smartphone market to FB’s share buyback authorization to IBM’s Watson Health segment, analysts moving full steam ahead for these giants. Let’s dive in:
Apple Continues to Rule the Global Smartphone Market
Canaccord analyst Michael Walkley analyzed Apple’s value share in the premium-tier global smartphone market during the third quarter of this year, and the tech titan “maintains dominant value share.” Therefore, the analyst reiterates a Buy rating on shares of AAPL with a $140 price target, which represents a 25% increase from where the stock is currently trading.
Compared to the second quarter, where AAPL boasted 75%, the company now has captured 106% of industry profits, which the analyst attributes to Samsung’s considerable downfall in profits on back of its explosive Galaxy Note 7 fallback and subsequent recall.
Walkley explains, “We believe Samsung’s Galaxy Note 7 sells approximately 20M units worldwide on an annual basis or about $5-$6B in revenue. While Apple should benefit from a portion of this lost Samsung revenue, we believe Samsung’s Galaxy S7 and S7 Edge have captured some lost Note 7 sales and continue to perform well into the holiday season.”
Furthermore, based upon the analyst’s surveys, the iPhone 7 Plus models demonstrate supply constraints, which he postulates restricts the company’s larger screen share gains compared to its recalled rival, the Samsung Galaxy Note 7. Particularly in light of its competitor’s obstacles with the Galaxy Note 7 coupled with robust iPhone 7 Plus demand, the analyst argues AAPL will “extend its leading market share of the premium tier smartphone market installed base.”
Ultimately, “We believe these trends should enable the iPhone installed base to exceed 570M exiting C2016, and this impressive installed base should drive strong future iPhone replacement sales and earnings, as well as cash flow generation to fund strong long-term capital returns. While we anticipate a stronger upgrade cycle in C2018 with the 10-year anniversary iPhone 8, iPhone 7 demand is sold and should bridge the gap until a new form factor iPhone is likely released in C2017,” Walkley concludes.
Michael Walkley has a very good TipRanks score with a 61% success rate and he stands at #30 out of 4,235 analysts. Walkley garners 14.2% in his annual returns. When recommending AAPL, Walkley gains 21.9% in average profits on the stock.
TipRanks analytics exhibit AAPL as a Strong Buy. Out of 34 analysts polled by TipRanks in the last 3 months, 28 are bullish on Apple stock, 5 remain sidelined, and 1 is bearish on the stock. With a return potential of nearly 17%, the stock’s consensus target price stands at $130.47.
Facebook: Time to Add Positions
Facebook shares were rising 4% yesterday after the social media giant filed an 8-K Friday announcing that its Board has approved the repurchase of $6 billion of Class A Shares starting the first quarter of 2017, complete with no expiration. Deutsche Bank analyst Lloyd Walmsley is like-minded with positive investor sentiment, believing this is a “welcome launch of a capital return program,” which coupled with FB’s intent to transition to net share settlement of stock options will effectively reduce dilution.
In reaction to the multi-billion-dollar share buyback authorization, the analyst reiterates a Buy rating on FB with a price target of $150, which represents a 23% increase from where the shares last closed.
Walkey sings the praises of the giant and commends the advantageous value in the stock, opining, “We would add to FB positions after the recent pullback given shares represent an outstanding value in our view,” adding the company is in an excellent position “with plenty of levers left around near and long term growth.”
For now, Walkey asserts, “We make no changes to our estimates; recent FX moves (strengthening USD) would offset this. We see the buyback as a strong statement from the Board that it intends to manage capital with discipline.”
Though the company also released a second 8-K on Friday announcing that Chief Accounting Officer (CAO) Jas Athwal intends to resign from his role, effective February 17, 2017, the analyst notes, “We see this as unrelated to recent news around FB engagement metric miscalculations. […] Advertisers see great returns on FB and will likely keep growing spend despite the negative headlines around miscalculated metrics.”
Moreover, “Also on topics of controversy, we see the Fake News reports as overblown and believe it fades with time having no meaningful impact on engagement,” Walmsley surmises.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, five-star analyst Lloyd Walmsley is ranked #282 out of 4,235 analysts. Walkley has a 59% success rate and realizes 12.6% in his yearly returns. When suggesting FB, Walkley earns 0.0% in average profits on the stock.
TipRanks analytics demonstrate FB as a Strong Buy. Based on 38 analysts polled by TipRanks in the last 3 months, 35 rate a Buy on FB, while 3 maintain a Hold. The 12-month average price target stands at $158.33, marking a 30% upside from where the stock is currently trading.
IBM Watson Health: A Potential Significant Revenue Driver
Merrill Lynch analyst Wamsi Mohan hosted IBM Watson Heath General Manager Deborah DiSanzo at his “Transforming World Conference” in London, highlighting the evolution of Watson Health, its present applications, as well as the overall Watson ecosystem.
On the heels of the conference, Mohan reiterates a Buy rating on shares of IBM with a $185 price target, which represents a 13% increase from current levels.
Mohan believes, “Although early days and not core to our recent upgrade, Watson has the potential to drive significant revenue growth over time. For example, Watson Oncology studies can be up to $250/patient/study, which can become a material revenue stream (15mn+ cancer patients annually globally increasing to over 24mn over the next 20 years).”
Additionally, regarding key trends in healthcare, IBM Watson Health is entering at an opportune time, as the analyst underscores, “Watson is coming to market at a crucial time in healthcare as the industry is in the midst of transformation, according to DiSanzo.”
Overall, Watson Health is at a stellar merging of cloud meets cognitive computing, considering, “Watson Health platform is made up of 4 key components, all instrumental to its success, (1) built on IBM’s cloud technology through its SoftLayer and Bluemix offering, (2) key content through M&A and partnerships that is used to train Watson, (3) cognitive capabilities that use all available machine learning principles, and (4) an ecosystem of partners to build a successful platform,” Mohan contends.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, three-star analyst Wamsi Mohan is ranked #2,029 out of 4,235 analysts. Mohan has a 51% success rate and yields 0.8% in his annual returns. When rating IBM, Mohan acquires 0.8% in average profits on the stock.
TipRanks analytics indicate IBM as a Hold. Out of 15 analysts polled by TipRanks in the last 3 months, 3 are bullish on IBM stock, 9 remain sidelined, and 3 are bearish on the stock. With a loss potential of nearly 6%, the stock’s consensus target price stands at $153.64.