As the earnings bell prepares to toll for Apple Inc. (NASDAQ:AAPL) and Facebook Inc (NASDAQ:FB), two of Wall Street’s champion analysts are laying out bullish cases for these two kings of the tech industry. Let’s delve into the ins and outs of why Apple’s iPhone X launch matters more than its second fiscal quarter earnings performance- and why Facebook’s acquisition of Instagram is paying off in a big way:
Good Risk/Reward for Apple Approaching the iPhone X Release
Apple looks to be able to meet consensus expectations heading into the print, says top analyst Michael Olson at Piper Jaffray. Therefore, the analyst reiterates an Overweight rating on shares of AAPL with a $155 price target, which represents a just under 6% increase from where the stock is currently trading.
Will Apple deliver an impressive showing for the quarter come May 2nd? Olson says perhaps this will be an “uneventful quarter,” but that is the least important piece of the puzzle. For the analyst, and for most on the Street, it’s all coming down to raptly held investor focus for the highly-anticipated iPhone X, launching this coming fall. With this in mind, Olson advocates a major buying opportunity here.
“The setup for AAPL shares over the coming months appears favorable. We believe any unexpected ‘hiccups’ in results, would likely be glossed over as investors focus on the upcoming iPhone launch. We recommend owning AAPL due to the expectation for growing anticipation around iPhone X (aka iPhone 8) and a strong ongoing trajectory for services revenue,” opines Olson.
Ultimately, the analyst concludes staunchly in Apple’s corner, asserting, “Our view is that AAPL is well positioned through the next several quarters as proximity to iPhone X will capture investor attention, even if other issues emerge through the remainder of the year. […] AAPL shares appear positioned to continue a run into the Fall ’17 launch of the 10th anniversary iPhone. Our expectation is for Apple to continue to meet/beat near-term iPhone estimates. This confidence is based to some degree on relatively easy comps […] but also on our survey work that shows consumers are, at this point, generally unaware that ’17 is the 10th anniversary iPhone launch and are not waiting to buy.”
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, top five-star analyst Michael Olson has achieved a high ranking of #92 out of 4,571 analysts. Olson upholds a 68% success rate and realizes 14.9% in his annual returns. When recommending AAPL, Olson garners 11.7% in average profits on the stock.
TipRanks analytics demonstrate AAPL as a Strong Buy. Out of 36 analysts polled by TipRanks in the last 3 months, 28 are bullish on Apple stock, 7 remain sidelined, and 1 is bearish on the stock. With a return potential of 7%, the stock’s consensus target price stands at $154.07.
Facebook’s Winning Instagram Formula for Success
Yesterday morning, Mark Zuckberg had to have been grinning from ear-to-ear as Facebook-acquired Instagram just shot past 700 million monthly active users (MAUs). It’s an advantageous turning point from the eyes of top analyst Colin Sebastian at Baird, who notes that this represents “the most rapid addition of 100M users in the platform’s history.” This is impressively quite an acceleration from 500 million MAUs just a year ago in June.
In reaction to the news, the analyst reiterates an Outperform rating on FB with a price target of $163, which represents an 11% increase from where the shares last closed.
Sebastian notes, “During the company’s YE16 earnings call in early February, CEO Mark Zuckerberg indicated Instagram had also surpassed the 400M DAU threshold. Instagram engagement levels have improved following the rollout of features largely copied from Snapchat’s (SNAP-not covered) ephemeral sharing platform, with Instagram Stories now boasting over 200M DAUs (vs. SNAP DAUs of ~160M), in addition to new AR filters and Custom Geostickers (similar to SNAPs lenses/sponsored filters).”
Overall, “Increasing engagement levels should drive stronger Instagram monetization, but significant runway remains. […] Instagram engagement appears to be accelerating (as measured by DAU/MAU ratio), which should provide a tailwind to FB revenue trends in CY17 to help offset the expected impacts of stabilizing Facebook ad-load growth,” predicts Sebastian, confident on “Instagram momentum” continuing its accelerated rise, making Facebook an even more valuable stock to own.
Colin Sebastian has a very good TipRanks score with a 77% success rate and a high ranking of #19 out of 4,571 analysts. Sebastian yields 20.7% in his yearly returns. When recommending FB, Sebastian gains 28.3% in average profits on the stock.
TipRanks analytics show FB as a Strong Buy. Based on 38 analysts polled by TipRanks in the last 3 months, 36 rate a Buy on Facebook stock while 2 maintain a Hold. The 12-month average price target stands at $163.47, marking a nearly 12% upside from where the stock is currently trading.