Analysts are chiming in with research reports revealing a cautious outline on Tesla Motors Inc (NASDAQ:TSLA), but bullish perspectives on Apple Inc. (NASDAQ:AAPL) and Advanced Micro Devices, Inc. (NASDAQ:AMD). One analyst remains sidelined even as Tesla’s shares have seen a SolarCity acquisition-propelled rise, whereas two of Wall Street’s top analysts see strong long-term pictures ahead for Apple and AMD. Let’s take a closer look:
Tesla’s SolarCity Acquisition Has Boosted Shares, But Confusing Crosswinds Remain Adrift
Oppenheimer analyst Colin Rusch weighs in from the sidelines on the recent rally Tesla shares experienced following the Solar City acquisition. Expecting delays for the electric car giant’s Model 3 and skeptical as to what the SolarCity integration will look like for TSLA’s overall financial picture, the analyst is cautious amid these “pervasive issues,” reiterating a Perform rating on TSLA without listing a price target.
For 2017, Rusch holds his forecast at $3.9 billion with $1.65 billion for solar systems coupled with $2.25 billion for auto capex, ready to adjust for capex and capital needs contingent upon SolarCity’s impact on TSLA’s deployments. Additionally, the analyst adjusts his projection from his prior forecast of 24.5K deliveries to 22.2 K, which subsequently lowers his revenue model from $2,237 million to $2,075 million and EPS from ($1.04) to ($1.24). However, Rusch maintains his 2017 EPS estimate of ($0.15).
Though the analyst believes option sales drive a significant percentage of the company’s auto gross margin, he notes, “[…] we believe the core manufacturing efficiency is the fundamental driver of long-term profitability and shareholder value.”
Ultimately, “With TSLA shares rallying 30%+ since the closing of the SolarCity acquisition and nearly 20% YTD (vs. S&P 500 +2.6% YTD), we believe it is a good time to consider where the company is and where it is going over the course of the year. We believe consensus is that Model 3 first shipments will begin in 3Q17 and shares will rally into that event. And while we are largely in agreement with that sentiment, we believe the ambition of the platform is much broader with the company working on multiple fronts, including restructuring SolarCity, working with Panasonic on two factory ramps, leading the development and implementation of autonomous vehicles, and innovating how cars are manufactured. We expect multiple crosswinds impacting results which could prove confusing for investors,” Rusch contends.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Colin Rusch is ranked #641 out of 4,373 analysts. Rusch has a 48% success rate and gains 7.4% in his yearly returns. When recommending TSLA, Rusch garners 96.0% in average profits on the stock.
TipRanks analytics exhibit TSLA as a Hold. Based on 14 analysts polled by TipRanks in the last 3 months, 5 rate a Buy on TSLA stock, 6 maintain a Hold, and 3 issue a Sell. The 12-month average price target stands at $230.73, marking a 7% downside from where the stock is currently trading.
Apple’s iPhone Installed Base Lays Groundwork for 2X Services Revenue in 4 Years
Apple shares rose 6% yesterday on back of stellar iPhone 7 and iPhone 7 Plus sales, outperforming on revenue and EPS for both consensus as well as Canccord top analyst Michael Walkley‘s expectations.
Not only does the analyst remain confident in the success of the tech giant, he predicts revenue from services “could double over the next 4 years.” Therefore, Walkley reiterates a Buy rating on shares of AAPL while boosting the price target to $142, which represents a just under 11% increase from current levels.
For the fourth quarter, Apple posted a record high of 78.3 million iPhones that topped the analyst’s 77.5 million forecast as well as an ASP of $695 ahead of his prediction of $683. Conversely, the team’s outlook for revenue of $51.5 to $53.5 billion underperformed Walkley’s estimate for the second fiscal quarter of 2017 of $54 billion. Additionally, the analyst is less confident than consensus who calls for 53 million iPhones in the second quarter, due to dipping ASPs weighed down by “normal seasonal trends,” leading him to call for 50.1 million iPhones.
“[…] we believe double-digit growth in the installed base of iPhone users positions Apple for strong sales and earnings growth with the iPhone 8 upgrade cycle ramping later in C2017 […] Given the Galaxy Note 7 issues and strong demand for the iPhone 7 Plus models, we believe Apple will continue extending its leading market share of the premium tier smartphone market installed base. We believe these trends enabled 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. We anticipate a stronger upgrade cycle in F2018 with the 10-year anniversary iPhone 8 likely released in September 2017. Therefore, we maintain our bullish F2018 iPhone estimates given our belief a new form factor will drive very strong upgrade sales within the large and loyal iPhone consumer base,” Walkley concludes.
Michael Walkley has a very good TipRanks score with a 61% success rate and a high ranking of #36 out of 4,373 analysts. Walkley realizes 15.6% in his annual returns. When suggesting AAPL, Walkley yields 22.9% in average profits on the stock.
TipRanks analytics demonstrate AAPL as a Strong Buy. Out of 34 analysts polled by TipRanks in the last 3 months, 28 are bullish on Apple stock and 6 remain sidelined. With a return potential of nearly 9%, the stock’s consensus target price stands at $140.11.
Advanced Micro Devices Hits Record Highs in 4Q with Room for Upside in 2017
Advanced Micro Devices shares soared 16% yesterday after delivering a robust showing for its fourth-quarter earnings, which had investors cheering. In reaction, Canaccord analyst Matt Ramsay sings the praises of the chip giant’s “strong end to [a] remarkable 2016” and reiterates a Buy rating while lifting the price target from $13 to $14, which represents an 18% increase from current levels.
For the fourth quarter, the chip giant earned its highest client revenues in seven quarters as well as its highest graphics in 11 quarters, thanks to a flourishing graphics market. AMD posted $1.11 billion in revenue, topping the analyst’s expectation of $1.07 billion. While revenue saw a 15.4% decrease in quarter-over-quarter, it rose 15.4% year-over-year. Non-GAAP gross margin reached 32.0%, which fell “in line” with expectations. Meanwhile, non-GAAP operating expenses of $357 million were slightly over the analyst’s $350 million forecast resulting in LPS of $(0.01), slightly ahead of his $(0.02) estimate.
G&G sales escalated 28% quarter-over-quarter as well as 28% year-over-year, trouncing Ramsay’s prediction calling for $487 million. Revenue in EESC hit $506 million, a 39% dip in quarter-over-quarter, but a 4% rise increase in year-over-year, not quite meeting the analyst’s forecast of $585 million.
Though the chip giant’s gaming console business “declined sharply with seasonality,” Ramsay believes this was more than offset by the company’s “impressive beat” from C&G that climbed on solid GPU sales.
Moving forward, AMD management called for revenue guidance in the first quarter of 2017 to drop 11% to $984 million at the midpoint, which is slightly over the analyst’s $968 million projection, who anticipates better-than-expected seasonality in the CG segment, which should help the Ryzen launch in the spring. Additionally, non-GAAP operating expenses were guided to $360 million, more than the analyst’s expectation of $347 million, considering R&D investments coupled with rising sales and marketing costs. 2017 guidance in general has been left “vague,” and Ramsay anticipates a clearer picture from the forthcoming analyst day in May.
Ramsay opines, “A remarkable turnaround in 2016 saw high-single digits revenue growth in both segments, spending discipline and a significant improvement in the balance sheet. With a much more healthy overall company and stronger management team now well established in their roles, 2017 sets up as a critical year for the company with new product introductions across the PC, GPU and server segment that (if successful) should all yield materially higher gross margins versus today’s offerings.”
“Overall, with several catalysts still to come in 2017 and beyond, our BUY thesis remains very much intact. While we recognize roadmap execution and competitive risks remain, we believe risk/ reward remains tilted toward the upside as we continue into 2017 and our long-term bullish target toward $1.00 in EPS remains attainable by 2020,” Ramsay surmises. With launches to hit this year from Ryzen desktop, Naples server, Vega GPU, and Raven Ridge notebook products, the analyst sees bright skies ahead for AMD.
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, top five-star analyst Matt Ramsay has achieved a high ranking of #40 out of 4,373 analysts. Ramsay upholds a 66% success rate and earns 21.8% in his annual returns. When rating AMD, Ramsay collects 29.8% in average profits on the stock.
TipRanks analytics indicate AMD as a Buy. Based on 15 analysts polled by TipRanks in the last 3 months, 10 rate a Buy on AMD stock, 4 maintain a Hold, while 1 issues a Sell. The 12-month average price target stands at $11.42, marking a 5% downside from where the shares last closed.