Apple Meets High Hopes
Apple Inc. (NASDAQ:AAPL) hosted its first event at the Steve Jobs Theater in the new Apple Park yesterday, where the tech titan had a grand unveiling of a slew of new products, including three new models added to the iPhone family. The buzziest update of all? An eagerly awaiting public finally caught sight of the iPhone X, Apple’s tenth anniversary edition of the original iPhone.
Top analyst Michael Olson at Piper Jaffray believes “Apple generally met […] lofty expectations” for the titan “to deliver a device with a relatively more robust set of upgraded features,” and sings the praises that this iPhone X could be a catalyst to “drive AAPL higher.”
In reaction, the analyst maintains an Overweight rating on shares of AAPL with a $190 price target, which implies a just under 19% increase from where the stock is currently trading.
“Most notably, we would point to the change in form factor (edge-to-edge, glass OLED screen) and 3D sensing (enabling facial recognition) as the key upgrades,” highlights Olson. Additionally, Apple revealed the third in its Apple Watch Series, boasting an LTE cellular connectivity option that enables users to make and receive both calls and data without needing an iPhone, as well as a 4K Apple TV.
Should you buy Apple shares now? Absolutely, says Olson, who asserts: “We recommend owning AAPL due to potential for a strong iPhone upgrade cycle and a favorable trajectory for services revenue.”
Ultimately, “AAPL is well positioned as the iPhone X captures investor attention,” Olson contends, underscoring, “Apple has indicated that, despite reporting favorable iPhone units in the most recent quarter, iPhone was negatively impacted by awareness of upcoming devices. While we are less certain of awareness of new iPhones, this commentary suggests this cycle will see a higher upgrade rate than previous iPhones, except perhaps iPhone 6.”
Considering that in the year that followed Apple’s launch of the iPhone 6, complete with the bigger 6 Plus “form factor,” unit sales saw a 36% year-over-year rise, the analyst forecasts the iPhone X cycle to drive 12% growth. Also taking under account roughly 300 million iPhone users on a device already around two years old, Olson anticipates this bodes well for Apple, “providing a large base of potential upgraders.”
Michael Olson has a very good TipRanks score with a 67% success rate and a high ranking of #58 out of 4,642 analysts. Olson garners 18.4% in his yearly returns. When recommending AAPL, Olson gains 16.3% in average profits on the stock.
Most of Wall Street is backing this tech titan, as TipRanks analytics exhibit AAPL as a Buy. Out of 32 analysts polled by TipRanks in the last 3 months, 23 are bullish on Apple stock while 9 remain sidelined. With a return potential of 8%, the stock’s consensus target price stands at $174.43.
Tesla’s Potential “Breakthrough” in the Car Parc
Does Tesla Inc (NASDAQ:TSLA) fall that far from the Apple tree? Interestingly enough, with Apple launching its iPhone X yesterday, one voice on Wall Street sees the potential for CEO Elon Musk’s electric car giant’s mass-market Model 3 to be the kind of “breakthrough offering” that shakes up the vehicle universe much like Apple’s iPhone first did a decade ago.
When it comes to the Model 3, Bernstein analyst Toni Sacconaghi is certainly intrigued by Tesla’s first dabble into the mass-market vehicle-verse, likening its potential to the way the iPhone revolutionized the way consumers sought after smartphones.
Sacconaghi notes, “[…] smartphones existed prior to iPhone (e.g., Palm, Blackberry (BBRY), etc.), but it wasn’t until Apple introduced iPhone that smartphones became mass market. We believe Tesla’s Model 3 offering is that breakthrough product for EV adoption. We note that, at a starting price of $35,000, the Model 3 has price, performance and brand cachet all in-line with similarly priced, entry level luxury vehicles like the Audi A4 and BMW 3-series… and, of course, consumers will never have to visit a gasoline station. Furthermore, incumbents have started to launch their own EVs in response to Tesla, which was a common theme during prior ‘positive acceleration’ phases of prior adoption curves […]”
Looking ahead, the analyst expects on net that electric vehicles will need 30 to 40 years before securing 60% penetration of the total vehicle population (the car parc), which will translate to roughly 60% of the automotive market unit sales by 2050. As time passes, Sacconaghi believes more and more migration has a real chance to transpire at a rapid-fire pace.
However, while “on net, we are fairly bullish on the evolution of the EV market,” says Sacconaghi, he ultimately fears Tesla is plagued by various short-term challenges, and therefore concludes he “would not be chasing the stock at current levels.”
As such, the analyst maintains a Market Perform rating on TSLA with a price target of $265, which implies a just under 27% downside from where the shares last closed. (To watch Sacconaghi’s track record, click here)
The majority of the Street sides with Sacconaghi on the sidelines, considering TipRanks analytics showcase TSLA as a Hold. Based on 17 analysts polled by TipRanks in the last 3 months, 5 rate a Buy on Tesla stock, 7 maintain a Hold, while 5 issue a Sell on the stock. The 12-month average price target stands at $311.46, marking a 14% downside from where the stock is currently trading.
Snap Stares Down Lackluster Advertiser Adoption
Snap Inc’s (NYSE:SNAP) investors have reason to be on pins and needles these days after Oppenheimer analyst Jason Helfstein‘s advertising agency checks have shown advertising adoption is not looking strong, as many on the sell-side are emphasizing.
“This is especially surprising,” says Helfstein, who points out that “the mix-shift to programmatic has reduced pricing, increasing ROI.” Though the analyst is hesitant on the popular Snapchat app parent company’s “cautious 2H outlook,” he believes in Snap’s long-term opportunity, where the company’s full-screen mobile ads are poised to take a bite into ad-spend transitioning from linear television to a mobile platform.” However, the analyst has reigned in his revenue forecast for the back half of the year by 8% following these advertising agency checks pointing to weakness.
“We believe shares can work over time,” asserts the analyst, who reiterates an Outperform rating on SNAP stock with a $16 price target, which implies a just under 5% increase from current levels. (To watch Helfstein’s track record, click here)
Overall, “While demand for Discover is strong on brand-safe/premium content, advertisers are not excited about user-story ads, and the use of lens and filters has slowed among large advertisers. While major ad agencies continue to see SNAP as an attractive platform to reach younger users, advertiser adoption has been slower than expected. Meanwhile, SNAP’s programmatic self-service platform only launched in June. Combined with the difficult 3Q Olympics comps, and pricing impact of move to auction, investors should expect reduced revenue momentum, near term,” Helfstein surmises.
TipRanks analytics indicate SNAP as a Hold. Out of 27 analysts polled by TipRanks in the last 3 months, 8 are bullish on Snap stock, 14 remain sidelined, and 5 are bearish on the stock. The stock’s consensus target price stands at $15.02.