With earnings season just around the corner, analysts are weighing in on two of the most popular stocks in the market today, Apple Inc.(NASDAQ:AAPL) and Facebook Inc (NASDAQ:FB). While one analyst expects Apple’s Q2 guidance to be above Street expectations, the other believes that Facebook gained momentum in 4Q and poised for upside. Let’s take a closer look:
King of the earnings season Apple is set to report its numbers on Tuesday, January 31, and for this special event Mizuho analyst Abhey Lamba released a new research note, providing some expectations.
Lamba noted, “We expect results to come in toward the upper-end of management’s outlook which would be in-line to slightly above consensus. Our checks suggest stable iPhone demand with potentially better ASPs as a result of product mix. For its outlook, we think estimates are slightly on the higher side and, as such, management’s outlook may come in below consensus. However, we continue to favor the stock on significant n-t upgrade cycle.”
“Consensus is looking for mid-single-digit growth in iPhone units in F2Q which, granted an easier compare, is likely on the higher-side given potential demand taper. In all, we expect management to guide revenues toward $51-53bn (+1-5% Y/Y) vs. consensus of $54bn while gross margins could come in around 38.5-39.0% (vs. estimates of 38.6%) on ongoing product mix shift. Implied EPS could come in around $1.95-2.00 vs. estimates of $2.13,” the analyst added.
As such, Lamba reiterated a Buy rating on Apple shares, with a price target of $130, which represents a potential upside of 9% from where the stock is currently trading.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Abhey Lamba has a yearly average return of 8.8% and a 63% success rate. Lamba has an 24.9% average return when recommending AAPL, and is ranked #389 out of 4342 analysts.
Out of the 45 analysts polled by TipRanks, 37 rate Apple stock a Buy, 6 rate the stock a Hold and 2 recommend a Sell. With a return potential of 9.6%, the stock’s consensus target price stands at $130.69.
Raymond James analyst Aaron Kessler is extremely bullish on Facebook Inc (NASDAQ:FB) ahead of upcoming earnings on Wednesday, February 1. The analyst upgraded FB from Outperform to Strong Buy, while keeping the price target at $160.
Kessler explained, “We upgrade shares of Facebook to Strong Buy given: 1) 4Q checks are positive and show continued momentum in 4Q; 2) we believe FB can continue to report upside to consensus estimates in 2017 despite some debate around ad load growth and expense growth; 3) we believe risk/reward is attractive with shares trading at ~24x/19x our 2016/2017 non-GAAP EPS (vs. expected 25% EPS CAGR).”
“We believe Street estimates, which call for ~41% operating expense growth, are reasonable and would note over the last three years, FB non-GAAP operating expense growth has come in ~7.5%, 9%, and 8.5% below original guidance (at midpoint). We have increased our expense growth modestly for 2017 though are still below consensus (34% vs. 41%),” the analyst added.
As usual, we like to include the analyst’s track record when reporting on new analyst notes. According to TipRanks, analyst Aaron Kessler has a yearly average return of 13.4% and a 62% success rate. Kessler has a 49.2% average return when recommending FB, and is ranked #148 out of 4342 analysts.