In a tale of two tech giants, is it the best of times for investors backing Apple Inc. (NASDAQ:AAPL) and Snap Inc (NYSE:SNAP)?
Drexel Hamilton analyst Brian White sure thinks so, and he is coming out swinging the bullish bat in favor of these two players constantly dominating buzz around the Street. After Apple already has closed the chapter on the season of iPhone “doldrums” with a surprisingly stellar third fiscal print and fourth quarterly outlook, the analyst is that much more enthused to see almost every company in his Apple Monitor beating historical seasonality for July sales. Meanwhile, with Snap gearing up to post its second quarterly financial results, even though the rest of the Street may be largely sidelined on this millennial king, White is not one to be cautious here. In fact, the analyst pegs an ideal buying opportunity for the investors who dare to recognize Snap’s masterful innovation at play. (To watch White’s track record, click here):
July Apple Monitor Sales Give Investors a Pop of Confidence
Apple has given White a reason to smile this morning after glancing at the preliminary July sales posted from the companies in his Apple Monitor index, which tracks sales of nine ‘important’ publicly-traded Apple suppliers based in Taiwan. These sales pinpoint a historical seasonality outperformance that have the analyst cheering the giant’s praises and continuing to vouch that this stock is globally underestimated.
Particularly on the heels of last week’s fiscal quarterly showing that eased a lot of apprehension circling a Street concerned all Apple had up its sleeve was the iPhone 8 cycle, the analyst reiterates a Buy rating on shares of AAPL with a $208 price target, which represents a close to 32% increase from where the stock is currently trading.
White asserts that especially as time approaches closer to the iPhone 8 launch, there is even more cause to get enthusiastic on the stock, elaborating, “Exiting the trough revenue quarter of Apple’s fiscal year last week, we believe investors will now feel more confident in owning the stock for the upcoming iPhone 8 cycle that is expected to begin this fall, while also benefitting from the company’s capital distribution initiative, attractive valuation and potential new innovations.”
Of the 97% of July sales tracked by White’s Apple Monitor, he commends an 11% to 12% MoM surge which performed better than the average 9% lift throughout the last consecutive 12 years. Notably, White juxtaposes this impressive outcome against the five-year average of a 9% rise as well, though this fell from last July’s 14% increase. White notes, “In our view, the ramp of components for the new iPhones this fall, combined with recently introduced Macs and iPad Pros likely contributed to this healthy July performance.”
“Although we expect iPhone 8 supply to be constrained in September, it appears that Apple has avoided the worst case scenario. During our China Tech Tour in April, there were positive vibes around future demand for the upcoming iPhone 8 throughout our trip with one contact indicating that ‘everyone is waiting on the iPhone 8’ and another stating ‘people only ask about the iPhone 8,'” underscores White.
Looking ahead to Bloomberg’s murmurings that the giant intends to release a cellular take on the Apple Watch this year without having to be “tethered” to the iPhone, the analyst appreciates the opportunity for Apple to strengthen its user base and “drive upgrades by existing users” – even if the time for the cellular world to join forces with the Apple watch has “taken longer than we originally expected.”
TipRanks analytics demonstrate AAPL as a Strong Buy. Based on 34 analysts polled by TipRanks in the last 3 months, 26 rate a Buy on Apple stock while 8 maintain a Hold. The 12-month average price target stands at $170.17, marking a nearly 8% upside from where the stock is currently trading.
Snap Bottoming Out Could Prove an Advantageous Gamble for the Bulls
All anticipation is on Snap’s forthcoming second quarterly print as a publicly traded company, and White believes investor sentiment is running scarce on positive conviction these days. What is there to do with a stock that investors love to “ghost” out of Facebook-induced fears of competition? White argues invest- as Snap continues to reign as darling of the millennial court, with bears abounding, the company is clearing room to amass robust upside prospects throughout the next year.
Therefore, ahead of earnings, the analyst maintains a Buy rating on the stock with a price target of $30, which implies a just under 122% upside from current levels.
For the second quarter, the analyst projects revenue will see a 114% year-over-year rise to $153.8 million, which is less bullish than the Street at $189.50 million, along with a loss per share of $0.16, compared to the Street’s estimate for ($0.14). White is angling for sales to hit somewhere between his and the Street’s expectations. With regards to average revenue per user (ARPU), the analyst projects $0.89, which would indicate a 77% surge from the $0.50 posted just one year prior. When glancing at average daily active users (DAU), the analyst forecasts a 21% rise to 174 million, although he notes, “[…] we believe this metric is less relevant when evaluating Snap’s overall results compared to Facebook and others.”
For the third quarter, the analyst estimates sales will bring in $213.4 million for Snap, with the Street estimating $276.7 million, and a loss per share of $0.17, with the Street predicting ($0.13).
“Snap on tap with enough gloom and doom to scare away a ghost,” acknowledges White, however, he emphasizes a key positive at Snap’s advantage: “Despite a never ending news flow of gloom and doom circling Snap, the company continues to forge ahead with new innovations, original shows and partnerships.” Just two months ago, the Wall Street Journal cheered Time Warner’s $100 million, two-year alliance with Snap, including a collaboration built on shows and ads alike.
Ultimately, the picture looks promising to White for investors willing to take the risky bite, as he contends, “The combination of a never ending, doomsday narrative around Facebook’s perceived impact on Snapchat and the recent share lockup expiration has created a downward spiral in Snap’s stock price. With sentiment at such ghastly levels, and our view that Snap can monetize its unique position with millennials, we believe the stock is in a bottoming process and has strong upside potential over the next 12 months.”
TipRanks analytics exhibit AAPL as a Hold. Out of 31 analysts polled by TipRanks in the last 3 months, 11 are bullish on Apple stock 15 remain sidelined, and 5 are bearish on the stock. With a return potential of 47%, the stock’s consensus target price stands at $20.44.