Nomura Analysts Confident on Apple Inc. (AAPL) and Paypal Holdings Inc (PYPL) Ahead of Earnings; Here’s Why

Nomura analysts are chiming in with bullish forecasts on tech giants Apple Inc. (NASDAQ:AAPL) and Paypal Holdings Inc (NASDAQ:PYPL), as each company prepares to deliver third-quarter results. While one analyst sings the praises of Apple, noting a positive perspective that is wholly independent from arch-rival Samsung’s Galaxy Note 7 exploding battery debacle, another analyst sees an “attractive” risk/reward profile for Paypal approaching its quarterly print. Let’s dive in and explore why:

Apple Inc.

Nomura analyst Jeffrey Kvaal is out with a research report on Apple amid competitor Samsung’s Galaxy Note 7 exploding battery woes, ahead of its most expected third-quarter results on Tuesday, October 25th. Though Samsung is certainly in hot water, Kvaal believes it is “unlikely” that this malfunction will translate to a boost in iPhone units.

As far as Kvaal sees the situation, “Our positive view does not require contribution from the Note.” Therefore, the analyst remains bullish independently of the tech titan’s rival’s affairs, reiterating a Buy rating on AAPL with a $135 price target, which represents a 15% increase from where the shares last closed.

Kvaal explains, “Even those leaving Samsung may not reflexively reach for iOS; anecdotally we believe Note users to be a haven of the Apple-phobes.”

“Samsung’s battery challenges with its newest Note phone will likely reduce its unit volume; our colleague CW Chung estimates a worst-case scenario of 28mn total phones. However, we do not consider it prudent to assume Apple will benefit materially as a result. Our checks indicate that to date, the 80- 90% of consumers returning GN7s have opted to stay within the Samsung family,” Kvaal concludes.

Overall, Kvaal’s iPhone estimates remain above consensus. The analyst models 46 million and 78 million in September and December, compared to consensus estimates of 44 million and 75 million, respectively.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, five-star analyst Jeff Kvaal is ranked #319 out of 4,180 analysts. Kvaal has a 62% success rate and gains 11.5% in his yearly returns. When recommending AAPL, Kvaal earns 8.9% in average profits on the stock.

TipRanks analytics exhibit AAPL as a Strong Buy. Based on 36 analysts polled in the last 3 months, 31 rate a Buy on AAPL, 4 maintain a Hold, while 1 issues a Sell. The consensus price target stands at $129.81, marking a nearly 11% upside from where the stock is currently trading.

Paypal Holdings Inc

Paypal is set to deliver its third-quarter earnings on Thursday, October 20th, and Nomura analyst Bill Carcache anticipates an “incrementally more positive margin” in his preview of the online payment giant’s quarterly results.

As such, the analyst remains bullish with expectations for a predominantly “in line” quarter and maintains his estimates, reiterating a Buy rating on shares of PYPL with a $54 price target, which represents a nearly 37% increase from where the stock is currently trading.

For the quarter, Carcache projects PYPL will bring in $0.42 in EPS, which mirrors that of consensus. Looking ahead to the fourth quarter, the analyst expects PYPL will hit $0.55 in EPS, which slightly tops the Street’s estimate of $0.49.

The analyst anticipates the foreign exchange market (FX) to be a “greater headwind” in PYPL’s third quarter, mostly attributed to “weakness” in the Great British Pound (GBP), which has declined 15% year-over-year in comparison to the U.S. Dollar (USD).

Though Carcache believes the print will prove to be positive for the company, he predicts the crux of investor focus will circle PYPL’s outlook. The analyst notes, “We don’t anticipate full-blown 2017 guidance this quarter but do believe PYPL may offer additional details on its margin expectations. Investors walked away from last quarter’s earnings call believing that PYPL was guiding to margin compression, but commentary in recent public appearances has been more bullish.”

Moreover, “We think ‘stable’ would be good enough for the margin outlook but expect shares to enjoy an incremental boost if management guides to potential expansion, while emphasizes the accretive nature of its recent partnership deals—a possibility that we believe makes the risk-reward attractive and leads us to recommend buying PYPL into the print,” Carcache concludes.

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 Bill Carcache is ranked #164 out of 4,180 analysts. Carcache has a 74% success rate and realizes 11.2% in his annual returns. When recommending PYPL, Carcache yields 7.0% in average profits on the stock.

TipRanks analytics demonstrate PYPL as a Buy. Based on the 27 analysts polled in the last 3 months, 16 rate a Buy on PYPL, 9 maintain a Hold, while 2 issue a Sell. The 12-month price target stands at $45.18, marking a 14% upside from where the shares last closed.

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