Apple Inc.: Top Analyst Dismisses Supply-Chain Fears

RBC Capital's Amit Daryanani believes odds are in favor of Apple delivering upside come this Thursday's FQ1 turnout.

Apple Inc. (NASDAQ:AAPL) may produce a second fiscal quarter guide that will leave the Street underwhelmed, but one of Wall Street’s best performing analysts believes supply-chain worries are not even close to actually happening. In other words, the bark of the “noise” is much worse than the actual bite of what will likely prove to be a merely lukewarm second fiscal quarter guide.

Top analyst Amit Daryanani at RBC Capital believes even as far as the first fiscal quarter performance is concerned for 2018, the tech titan is still in solid standing to beat out expectations, even in face of “prevalent supply chain related noise.”

With bullish confidence, the analyst sees the forest through the trees and maintains an Outperform rating on AAPL stock with a $200 price target, which implies a 20% upside from current levels.

For the first fiscal quarter, Daryanani continues to bet that Apple will yield $88.8 billion in revenue and hit $3.88 in EPS, ahead of the Street’s $86.8 billion estimate for revenue and $3.83 forecast for EPS. For the second fiscal quarter, the analyst is more conservative than consensus, angling for $65.2 billion in revenue against the Street’s $67.8 billion estimate. Likewise on EPS, the analyst hovers under consensus, callijng for $2.62 billion in EPS for the second fiscal quarter compared to the Street’s $2.87. For fiscal 2018, the analyst expects Apple will yield $265 billion in full-year revenue and hit $10.80 in EPS, under the Street’s expectations for $273 billion in revenue and $11.46 in EPS.

Daryanani boils the facts down to “all you need to know” here ahead of the first fiscal quarter showcase of 2018 come Thursday: “We think AAPL ends-up printing upside to Dec-qtr (ahead of their guided range) and March-qtr guide while tepid will be nowhere near the noise/fear levels are suggesting. We think investors are ignoring ASP tailwinds that could more than offset concerns around units and enable an inline guide. Simplistically, AAPL’s EPS/FCF (and stock) should continue to work higher driven by a) higher iPhone ASP, b) Potential for gross-margin tailwinds (specially in H2) and c) Tax reform benefits. We are adjusting our models – by raising Dec-qtr estimates and lowering March-qtr to reflect our thinking that channel fill could have occurred sooner vs. our expectations. Net/Net: Our positive bias on AAPL remains intact and is driven by our expectation that AAPL could achieve $14+ EPS by FY19 and stock works its way to $200+ over the next 6-12 months driven by ASP’s enabling better revenues, F/X and Mix (services+memory) bolstering gross-margins and tax-reform coupled with buybacks enhancing their EPS profile.”

Amit Daryanani has a very good TipRanks score with a 91% success rate and a high ranking of #5 out of 4,759 analysts. Daryanani garners 32.4% in his yearly returns. When recommending AAPL, Daryanani realizes 29.5% in average profits on the stock.

TipRanks paints a picture of mostly positive analyst sentiment swirling around this tech titan’s empire. Based on 31 analysts polled in the last 3 months, 22 rate a Buy on Apple stock while 9 maintain a Hold. The 12-month price target of $194.36 suggests potential upside of nearly 16% from where the stock is currently trading.

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