Will the strength of Apple Inc.’s (NASDAQ:AAPL) iPhone 8 cycle be enough to pull past other rising market risks and can Snap Inc (NYSE:SNAP) stand the fire as Facebook attempts to steal the company’s freshest, hippest moves? One analyst boosts the price target on Apple underscoring advantageous iPhone 8 production estimates, but maintains caution overall in face of an over-saturated smartphone market. Meanwhile, for investors who interpret Facebook’s onslaught of “masks, frames and interactive filters” as a reason to get skittish, another analyst says the very reason Facebook is bringing its sharpest parroting game proves Snap is a true force of reckoning. Let’s take a closer look:
Apple’s Double-Sided Coin: iPhone 8 Production vs. Smartphone Market Risk
Rosenblatt analyst Jun Zhang is weighing in on Apple staunchly from the sidelines, encouraged by “aggressive” iPhone 8 production expectations set for 100 to 110 million units by the back half of the year, but cautious amid whirling rivalry and anticipated waning near-term iPhone demand. On back of robust production projections for the iPhone 8, the analyst reiterates a Neutral rating on shares of AAPL while lifting the price target to $120, which represents a close to 17% downside from where the stock is currently trading.
On a confident note, Zhang asserts, “In our view, the iPhone 8 OLED model will have a better cycle than the iPhone 7, and recent positive sentiment already reflects iPhone 8 optimism.”
However, “Slowing demand in China and increasing competition from Samsung (005930-KR:NR) this year might limit iPhone 8 sales growth. Further hardware upgrades might not be able speed up the overall smartphone upgrade cycle,” continues the analyst, who likewise points to “concerns over the saturation of the smartphone market” coupled with “gross margin pressure with increasing component costs” as underlying fears circling the tech giant.
“Recently, we believe Apple has reduced their June quarter production forecast by 8-10%. Even with the launch of the iPhone 7 Red model, we expect overall iPhone demand to slow down in the near term. Retail data suggests that iPhone 7 sales have sequentially declined in February and March. In our view, Samsung’s S8 launch might not affect short-term iPhone sales. Currently, suppliers are preparing capacity for the iPhone 8 production ramp in 2H17; therefore, we think the market has overlooked Q2 risk,” Zhang surmises.
As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, Jun Zhang is ranked #4,118 out of 4,556 analysts. Zhang has a 41% success rate and faces a loss of 10.5% in his annual returns. When recommending AAPL, Zhang forfeits 8.1% in average profits on the stock.
TipRanks analytics show AAPL as a Buy. Out of 37 analysts polled by TipRanks in the last 3 months, 29 are bullish on Apple stock, 6 remain sidelined, and 2 are bearish on the stock. With a return potential of 6%, the stock’s consensus target price stands at $153.07.
Facebook Copying Snap Features Is Not a Bad Sign
Snap shares were falling almost 7% yesterday after its archrival Facebook came out like a lion with an in-app camera release complete with filters that are the rival’s next double cross punch in the social media boxing ring to take out Snap.
Though some Snap shareholders are taken aback, fearful that Facebook has the cunning power to knock Snap out of the water, to Drexel Hamilton analyst Brian White, “imitation is the sincerest form of flattery.” White argues that Facebook’s competitive cloning of the popular Snapchat app parent company’s Lenses and Geofilters is the very reason to back the stock, as it’s essentially Mark Zuckerberg’s validation that Snap poses a real, leading-edge threat.
Therefore, despite the pullback yesterday, the analyst reiterates a Buy rating on SNAP with a price target of $30, which represents a 35% increase from where the shares last closed.
White notes, “Just last week, we noticed a healthy uptick in Sponsored Lenses from Snap. Although Snap is the innovator in Lenses and Geofilters, it is not surprising to see Facebook copy the company as South Korea-based Snow has already done.”
“After a strong performance over the past week and Facebook’s announcement around new ‘Snap-like’ features this morning, the stock is taking a breather,” adds the analyst, who advises to use yesterday’s “weakness as a buying opportunity.”
Ultimately, “In our view, Facebook announcements are a strong endorsement of Snap’s innovative products and creative vision. As such, we are not surprised to see another platform copy Snap; however, we believe Snap has a cachet with the millennial crowd that will be difficult for other platforms to garner. Like Apple in its younger days, we view Snap as a disruptive innovator with a laser like focus,” White concludes.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, five-star analyst Brian White is ranked #145 out of 4,556 analysts. White has a 65% success rate and earns 10.2% in his yearly returns. When recommending SNAP, White gains 8.9% in average profits on the stock.
TipRanks analytics indicate SNAP as a Hold. Based on 32 analysts polled by TipRanks in the last 3 months, 12 rate a Buy on Snap stock, 13 maintain a Hold, while 7 issue a Sell. The 12-month average price target stands at $23.48, marking a nearly 6% upside from where the stock is currently trading.