Apple Inc. (AAPL) Success Hinges Upon China, Micron Technology, Inc. (MU) Heads into 2H17 Strong


If Apple Inc. (NASDAQ:AAPL) can strengthen its China weakness after four back-to-back years of capturing record market share in the rest of the globe and should strong price trends continue to be an asset to Micron Technology, Inc. (NASDAQ:MU), analysts from UBS and Mizuho foresee bullish paths ahead for these leaders of the tech world. One analyst believes comps will be kinder to Apple, while another of Wall Street’s top-performing analysts is confident on Micron’s solid standing on back of insights from his Asia tour. Let’s dive in:

Apple: China is the Key

UBS analyst Steve Millunovich spies “double-digit unit growth” ahead for Apple’s iPhone shipments come fiscal 2018, anticipating a mass of iPhone 6 owners splurge to opt for the new model, whirring a “supercycle” into motion. All signs point to China, the tech giant’s Achille’s heel last year, as the determinant factor for whether 2018 will be Apple’s time to shine.

Millunovich opines, “The top five markets were a drag on growth in F16 but turned positive in F1Q/17. Units sold outside the top five markets have grown the last three quarters. We view this as a sign that Apple remains an aspirational brand and can increase its penetration in smaller markets. However, double-digit growth in F18 requires the top five markets to grow. China will be the swing factor.”

“Apple achieved its highest market share in four years in the US, Europe, Japan, and RoW. The exception was China, where share was down 17 points YoY as units fell 19%. Separating Mainland China from Hong Kong and Taiwan yields a more positive picture. Mainland China was down 5%, an improvement from Sep’s 31% decline. Hong Kong and Taiwan were down 50%. Chinese vendors Huawei, Oppo, and Vivo now account for 45% of sales in China. We think much of these sales are in Tier 3 and 4 cities where Apple has limited presence,” continues the analyst.

“March and June should be easier comps for Apple, especially in China,” Millunovich surmises, noting that global total iPhone sell-out units dipped 14% in March of fiscal 2016 and 8% in June, with sell-in iPhone units on a 16% decline in March and 15% in June.

As such, the analyst reiterates a Buy on AAPL with a price target of $151, which represents an almost 9% increase from where the shares last closed.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, two-star analyst Steve Millunovich is ranked #2,234 out of 4,539 analysts. Millunovich has a 67% success rate and earns 18.9% in his yearly returns. When recommending AAPL, Millunovich gains 21.8% in average profits on the stock.

TipRanks analytics demonstrate AAPL as a Buy. Based on 36 analysts polled by TipRanks in the last 3 months, 28 rate a Buy on Apple stock, 6 maintain a Hold, while 2 issue a Sell. The 12-month average price target stands at $147.71, marking a 6% upside from where the stock is currently trading.

Micron Rides Strong Trends into 2H:17

Top analyst Vijay Rakesh at Mizuho highlights key takeaways for Micron on the heels of his Asia trip, emerging bullish on the chip giant’s standing as it heads into the second half of this year. In Korea, Rakesh met with Samsung, Hynix, and other companies in the sphere of memory, handset, and OLED supply chain.

In reaction, the analyst reiterates a Buy rating on shares of MU with a $30 price target, which represents a just under 20% increase from where the stock is currently trading.

“Hynix, we believe, continues to see stronger 2Q DRAM with 20nm and LPDDR4 ramping (but we believe behind MU),” the analyst asserts, while also prospectively recognizing “a rationalization of expectations in the China handset chain, which is healthy.”

Ultimately, the key takeaways all paint a positive picture for the chip giant. Among the reasons, “1) for both Samsung and Hynix, DRAM and NAND inventories are low; 2) neither Samsung or Hynix is adding new capacity in 2017, nor has any urgency to add; 3) there is better visibility of 2Q (June) with DRAM pricing trending up; 4) NAND is supply is expected to be tight in 2H with better pricing given continued 3D-NAND constraints among suppliers; 5) Toshiba remains a work in progress and any deal could take time. We believe this positions MU and WDC very well into 2H17,” Rakesh contends.

Vijay Rakesh has a very good TipRanks score with a 74% success rate and a high ranking of #31 out of 4,539 analysts. Rakesh yields 27.9% in his annual returns. When recommending MU, Rakesh realizes 48.0% in average profits on the stock.

TipRanks analytics exhibit MU as a Strong Buy. Out of 21 analysts polled by TipRanks in the last 3 months, all 21 are bullish on Micron stock. With a return potential of nearly 16%, the stock’s consensus target price stands at $29.61.

More stocks covered by top performing analysts can be found here.

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