When rolling the dice on high expectations, where will Tesla Inc (NASDAQ:TSLA) and Apple Inc. (NASDAQ:AAPL) land among tech fiends clamoring for the new Model 3 and the decade anniversary upgrade of the iPhone model? From the eyes of one analyst at RBC Capital and a top analyst from Canaccord, hype might divide results for the two giants. While RBC Capital remains at a screeching sidelined halt, fearful that Tesla fans’ ballooning expectations for the Model 3 could pop amid surprising price tag add-ons and underwhelming gadgetry, Canaccord has even higher hopes now for Apple’s iPhone 8 launch to knock results out of the park. Let’s explore:
Tesla’s More Scaled Back Model 3 Could Disappoint
Tesla has carved out its claim to fame on back of luxury vehicles that though gleam with the dazzle factor simultaneously cost hundreds of thousands of dollars. That is- until buzz began for the Model 3, the electric car giant’s forthcoming mass-market car crafted with the brand’s esteemed bells and whistles, but twinkling at a fragment of the price: $35,000. Yet, a more cost-friendly vehicle also translates to dialed back techno frills, which excited Tesla aficionados might not be factoring into the equation.
RBC Capital analyst Joseph Spak predicts a mirage-like situation happening, where consumers discover the Model 3 is not all it is hyped up to be, which leads him to be apprehensive on the stock. Furthermore, for those who have already doled out reservations for the Model 3, Spak fears the Tesla base could be raring for an unwelcome surprise with Tesla mandating that the early-buyers pay for more expensive packages. In reaction, the analyst reiterates a Hold on shares of TSLA with a $314 price target, which represents a 13% increase from where the stock is currently trading.
“The more ‘scaled back’ Model 3 could prove disappointing to Tesla enthusiasts who lined up on announcement day and likely over-index to highly contented Tesla’s. Indeed, a perusal of Tesla fan message boards confirms this disappointment. However, the Model 3 is a ‘mass volume’ vehicle so overall, a ‘base’ vehicle may have more appeal. One of our concerns had been that a good number of the 373k Model 3 reservation holders could have been in line for sticker shock when they went to configure their vehicles and found the options required to get their vehicle earlier required some heftier packages. Walking in thinking you are paying $35k and coming out having to pay $50k could have caused people to walk away from their reservations. A recent survey indicated that the majority of Model 3 reservation holders currently own Toyotas indicating a vastly different customer than Model S/X owners (though not surprising). Our read-across here is that the initial ASP for the Model 3 may be a bit lower than previously thought,” Spak surmises, projecting a price tag of $45k.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, five-star analyst Joseph Spak is ranked #260 out of 4,558 analysts. Spak has a 66% success rate and realizes 10.4% in his annual returns. When recommending TSLA, Spak earns 0.0% in average profits on the stock.
TipRanks analytics exhibits TSLA as a Hold. Out of 16 analysts polled by TipRanks in the last 3 months, 5 are bullish on Tesla stock, 5 remain sidelined, and 6 are bearish on the stock. With a loss potential of nearly 10%, the stock’s consensus target price stands at $250.86.
Compelling Apple Upgrade Reaps Bumps in Price Target and Estimates
Apple’s iPhone 8 upgrade is captivating attention from investors and analysts alike, and top analyst Michael Walkley at Canaccord is no exception with his rising expectations for the strength of the upgrade to score big among an “impressive” and “loyal” installed base.
Ahead of the iPhone 8 release, the analyst is increasingly bullish on the upgrade’s “compelling” enhanced features, predicting Apple’s devoted iPhone owners will come through tenfold with regards to sales performance. Therefore, the analyst reiterates a Buy rating on AAPL while raising the price target from $154 to $165, which represents a just under 15% increase from where the shares last closed.
“Given the Galaxy Note 7 issues and strong demand for iPhone 7 Plus models, we believe Apple extended its leading market share of the premium-tier smartphone market installed base during 2016. We believe these trends enabled the iPhone installed base to exceed 570M users exiting C2016, and this expanding based helped drive record December quarter services revenue. We also believe the impressive installed base should drive strong iPhone replacement sales and earnings, as well as cash flow generation to fund strong long-term capital returns. While we anticipate a stronger upgrade cycle in C2018 with the 10-year anniversary iPhone 8, our surveys indicate solid iPhone 7 demand should bridge the gap until a new form factor iPhone that should capture higher ASPs launches in September. We anticipate steady iPhone 7 sales through the 1H/C’17, and we anticipate strong iPhone 8 sales to drive YoY unit growth and ASP expansion,” Walkley concludes.
Michael Walkley has a very good TipRanks score with a 67% success rate and a high ranking of #27 out of 4,558 analysts. Walkley garners 19.3% in his yearly returns. When recommending AAPL, Walkley gains 18.8% in average profits on the stock.
TipRanks analytics demonstrate AAPL as a Buy. Based on 37 analysts polled by TipRanks in the last 3 months, 29 rate a Buy on Apple stock, 6 maintain a Hold, while 2 are bearish on the stock. The 12-month average price target stands at $153.69, marking a nearly 7% upside from where the stock is currently trading.
More stocks covered by top performing analysts can be found here.