Apple Inc. (NASDAQ:AAPL) is “spring cleaning” its online store, welcoming Apple enthusiasts to a fresh line of both products as well as product updates, but for Nomura, the true prize waits in the fall: the launch of the iPhone 8. Meanwhile, as Micron Technology, Inc. (NASDAQ:MU) prepares to release it second fiscal quarter earnings for the year, Susquehanna raises a confident curtain on what investors can expect with the quarterly call. For Apple, it’s all coming down to the iPhone 8 launch, and for Micron, the chip giant’s success hinges upon execution and cost trends. Let’s take closer look:
Apple’s Mid-Cycle Updates Overshadowed By iPhone 8 Anticipation
Overnight, Apple put its online store on pause for a grand reveal this morning: both new products as well as updates to older lines are now available in the store, from a special edition red iPhone 7 and 7 Plus to the iPad Air 2 replacement (just deemed “iPad), to iPhone SEs carrying revamped storage capacities.
Nomura analyst Jeff Kvaal chimes in with key takeaways on what he nicknames “A Mid-Cycle Night’s Dream,” while placing a great deal of his expectations on the forthcoming 10th anniversary edition of the original iPhone. Mostly, the analyst sees a strong “commitment to the iPhone SE product line,” with checks underscoring the iPhone SE’s success in domestic prepaid markets as well as abroad.
In reaction, the analyst reiterates a Buy rating on shares of AAPL with a $135 price target, which represents a 3% downside from where the stock is currently trading.
“However, we expect the majority of customers seeking to upgrade their iPhones to wait out this mid-cycle refresh for the much anticipated release of the iPhone 8 later this year,” explains Kvaal. Though the tech giant indicated a special edition red iPhone 7 and 7 Plus were underway, carrying the same price tag as the traditional models, the analyst remains largely unfazed, believing the bulk of Apple’s plans to bring in considerable revenue are pointing to the iPhone 7s, 7s Plus, and 8.
The analyst adds, “Taking into account Tim Cook’s comments several months ago that Apple has ‘great desktops’ in its roadmap, we hope to see the Mac desktop product line refreshed sometime soon.”
Overall, Kvaal concludes seeing these announcements having “No impact on the iPhone 8 supercycle,” the biggest bullish piece of the Apple puzzle.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, five-star analyst Jeff Kvaal is ranked #281 out of 4,549 analysts. Kvaal has a 63% success rate and realizes 15.4% in his annual returns. When recommending AAPL, Kvaal yields 23.1% in average profits on the stock.
TipRanks analytics demonstrate AAPL as a Buy. Out of 36 analysts polled by TipRanks in the last 3 months, 28 are bullish on Apple stock, 6 remain sidelined, and 2 are bearish on the stock. With a return potential of 7%, the stock’s consensus target price stands at $150.21.
Razor Focus on Micron’s Execution and Cost Trends
With Micron expected to deliver its second quarter fiscal print for 2017 this Thursday evening, Susquehanna Mehdi Hosseini is approaching the print with a confident glimpse, reiterating a Positive rating on MU while boosting the price target from $29 to $31, which represents a just under 22% increase from where the shares last closed.
Taking under account the chip giant’s recent guidance hike, the analyst has brought up his own projections, cheering Micron’s expected “earnings peak” in the back half of this year to reach $0.90 to $0.95. Additionally, the analyst looks to overall quarterly gross margins to escalate circling 37%, a zap of de ja vu from Micron’s heyday in fiscal 2014. The analyst does acknowledge blended DRAM and NAND ASPs will begin to take a dip in the second half of this year, which have influenced his GM and other forecasts accordingly.
“However, even despite such ASP trends, MU could still demonstrate GM upside (above our updated assumptions) and thus deliver earnings upside if it were to execute in moving DRAM to the 18nm node (helping with a 20%+ decline in cost/GB) and scaling its 64L 3D NAND. We acknowledge that past history (and lack of execution) is an overhang on stock psychology, especially in an environment where ASPs have risen dramatically while overall GM has already expanded by ~10 pts (from the trough of 17% in May-2016 to 37.5% in Feb-2017). In this context, and since MU’s past execution is viewed as a mixed bag, we argue that continued execution on the cost curve could not only drive higher peak earnings, but could also meaningfully benefit investor perception, since Consensus is now focused on whether history repeats itself with MU. We maintain our Positive rating and are razor focused on MU’s execution (particularly on cost trends),” Hosseini surmises.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Mehdi Hosseini is ranked #939 out of 4,549 analysts. Hosseini has a 53% success rate and earns 6.5% in his yearly returns. However, when recommending MU, Hosseini loses 2.2% in average profits on the stock.
TipRanks analytics show MU as a Strong Buy. Based on 15 analysts polled by TipRanks in the last 3 months, all 15 rate a Buy on Micron stock. The 12-month average price target stands at $31.31, marking a nearly 23% upside from where the stock is currently trading.