Top analyst Michael Walkley at Canaccord sees bullish forecasts ahead for Apple Inc. (NASDAQ:AAPL) and QUALCOMM, Inc. (NASDAQ:QCOM); so much so that he is out lifting the price targets on both these tech giants. As Apple soars on record iPhone unit highs and even while Qualcomm battles it out with Apple over licensing, the analyst continues to bet on these two stocks for success.
Michael Walkley has a very good TipRanks score with a 63% success rate and a high ranking of #32 out of 4,382 analysts. Walkley garners 17.2% in his annual returns. When recommending AAPL, Walkley realizes 18.9% in average profits on the stock. When suggesting QCOM, Walkley yields 0.9%.
Let’s dive in:
Apple Continues to Lead in Smartphone Market Share Capture
Following a solid first fiscal quarter of 2017 where Apple posted record iPhone units that led to robust “premium-tier global smartphone market” share gains, Walkley sees full bullish steam ahead for the tech giant.
As such, the analyst reiterates a Buy rating on AAPL while boosting the price target from $142 to $154, which represents an 18% increase from where the shares last closed.
Even though Apple’s second fiscal quarter guidance indicates iPhone units will take a slight dip in year-over-year, the analyst believes 2018 will be a year of strong ASPs coupled with unit growth. Moreover, the analyst anticipates “pricing power” with the iPhone X, the 10th anniversary model of the phone, expecting the iPhone 8 will have good odds “[…] to monetize technology and form factor upgrades and improvements driving strong ASPs and unit growth in F2018.”
Overall, “Given the Galaxy Note 7 issues and strong demand for iPhone 7 Plus models, we believe Apple will extend its leading market share of the premium-tier smartphone market installed base during 2017. We believe these trends enabled the iPhone installed base to exceed 570M exiting C2016 driving 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 that should bridge the gap until a new form factor iPhone is likely released in September. We anticipate steady iPhone 7 sales through the 1H/C’17,” Walkley concludes.
TipRanks analytics exhibit AAPL as a Strong Buy. Based on 35 analysts polled by TipRanks in the last 3 months, 28 rate a Buy on Apple stock while 7 maintain a Hold. The 12-month average price target stands at $140.45, marking a nearly 8% upside from where the stock is currently trading.
Qualcomm Will Rise Above Apple Fire
Though Qualcomm has drawn recent fire surrounding its legal and licensing contention with Apple, Walkley sees favorably the forthcoming NXP acquisition. Assuming a safe scenario analysis where Apple pays a 33% decreased royalty amount per iPhone, the analyst reiterates a Buy rating on shares of QCOM while raising the price target from $75 to $76, which represents a just under 43% increase from where the stock is currently trading.
This analyst in particular has had Qualcomm in his coverage for the last 17 years and notes this is not the first attack the chip giant has experienced on its licensing model. Considering the advantageous NXP results and his confidence that Qualcomm will “ultimately prevail” in the dispute, Walkley believes the long-term rewards outweigh any short-term concerns.
“However, with the FTC complaint and now Apple’s lawsuit with similar language, it is clear Apple plans a long-term battle with Qualcomm in an attempt to lower royalty payments related to iPhone sales. While Qualcomm management is confident the FTC reached its conclusions with flawed logic and untrue information about Qualcomm’s business practices and responded to Apple’s suit with a strong language, we believe the claims and suits create increased long-term risks to Qualcomm’s QTL division (licensing business). While the uncertainty could weigh on the share price in the near term, we believe the sell-off post the Apple and FTC news more than prices in a worst-case scenario in regard to Apple’s licensing payments to Qualcomm long-term, and we believe Qualcomm combined with the pending NXP acquisition is an attractive investment opportunity during this time of uncertainty,” Walkley contends.
TipRanks analytics indicate QCOM as a Buy. Out of 18 analysts polled by TipRanks in the last 3 months, 6 are bullish on Qualcomm stock, 11 remain sidelined, and 1 is bearish on the stock. With a return potential of 30%, the stock’s consensus target price stands at $69.00.
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