Apple (AAPL) cannot escape the negative sentiment surrounding its iPhone. The tech giant began the year on news of an iPhone-induced revenue miss, and the stock has had to adjust to the reality of lower iPhone revenues. The iPhone accounted for nearly 60% of Apple’s sales in the fourth quarter, which means the company’s fortunes rise and fall with its flagship product.
Despite all the noises, Monness’ top analyst Brian White is making a bullish call on AAPL stock as the company prepares to release its fiscal first quarter results next Tuesday, Jan 29.
“Despite Apple’s rare pre-announcement on January 2 and our expectation of continued weakness for the foreseeable future, we believe Apple will benefit in the long run from its shift to a higher percentage of sales from Services, low market share across key product categories, the rise of the global middle class, opportunities for new product areas that leverage Apple’s vast digital ecosystem and the growing trust with customers given the company’s leadership position around data privacy. Moreover, valuation remains attractive, even on our severely depressed estimates,” White opined.
White is forecasting 1Q:FY19 revenue of $84.0 billion and EPS of $4.15. His 1Q:FY19 estimates is inline with Apple’s revised guidance on January 2. The analyst’s model reflects a 34% QoQ sales increase compared to an average rise of 63% over the past five December quarters and the 68% uptick in 1Q:FY18. Looking ahead, White is forecasting 2Q:FY19 sales of $53.34 billion and EPS of $2.19. Given the weakness of this iPhone cycle and continued economic challenges in China, the analyst believes the Street’s estimates are overly optimistic.
All in all, White reiterates a Buy rating on AAPL, with a price target of $200, which implies an upside of 29% from current levels.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, White has a yearly average return of 19.8% and a 67% success rate. White has a 17.3% average return when recommending AAPL, and is ranked #37 out of 5129 analysts.
The Consensus Verdict
Ultimately, the word on the Street points to a sidelined majority on Apple. In the last three months, the iPhone maker has landed 18 ‘buy’ ratings vs. 18 ‘hold’ ratings. It’s clear that Wall Street is largely divided between the bulls and the fence sitters when it comes to Apple’s market opportunity. That said, the consensus average price target points to $184.28, or nearly 19% upside potential for the stock. This suggests that by consensus expectations, for now, the bulls win on Apple. (See AAPL’s price targets and analyst ratings on TipRanks)