Julie Lamb

About the Author Julie Lamb

Julie graduated with a Bachelor of Arts in English with a focus on creative writing from the University of Louisville.

Gene Munster’s First Call on Apple Inc. (AAPL): Expects Strong FQ1 Print

Former Piper Jaffray top analyst Gene Munster is back with a confident call on Apple Inc. (NASDAQ:AAPL)- this time from his new research-driven, venture capital firm Loup Ventures- ahead of the tech giant’s fiscal first quarter earnings for 2017. The print is expected to be released January 31st after the close, and the analyst offers a positive preview along with high anticipation of the iPhone X as well as “the features we expect to advance Apple’s lead in AR-enabled devices.”

How well does the acclaimed analyst believe Apple will deliver this quarter? Munster is calling for 78 million iPhone sales, a 4% year-over-year rise.

Initially, CEO Tim Cook had speculated in AAPL’s fourth-fiscal quarter earnings call for 2016 that guidance for the first fiscal quarter of 2017 implied the iPhone might not hit supply demand equilibrium for this quarter, expressing, “I wouldn’t say [iPhone will be at equilibrium] at this point, because the underlying demand looks extremely strong on both products but particularly on the iPhone 7 Plus versus our forecast going into the product launch.”

However, the analyst notes, “Since Dec-16 guidance did not factor iPhone at equilibrium, demand was ‘extremely strong’, and the iPhone did in fact reach equilibrium in the US and near equilibrium internationally, we now expect a stronger iPhone number than we had previously expected (77m in Dec-16).”

With comps acting as a solid “ally,” Munster sees guidance for the second fiscal quarter also surging nicely ahead, predicting a 9% to 11% year-over-year rise to 56 to 57 million iPhone units.

Meanwhile, the analyst spotlights services, commending rising momentum as he continues to highlight Apple’s reinvention with a focus on Services. To Munster, this transition is essential, particularly as artificial reality (AR) and virtual reality (VR) platforms spring on the scene while revamping the giant’s mobile device claim-to-fame. For 2017, the analyst is seeking a near 20% year-over-year rise in Services revenue growth.

On the gross margin side, Munster is expecting a guidance beat, projecting AAPL will reach 39%, just ahead of the forecasted range of 38% to 38.5%. Though iPhone hardware margin has seen a bit of a downward turn of late, the analyst nonetheless is increasingly confident between higher-than-anticipated iPhone 7 Plus demand that carry along with it better storage configurations and robust performance in Services that accounts for more than 60% gross margins.

Overall, “With iPhone X, we see Apple doubling down on AR and extending it’s lead among AR-capable devices. iPhone is already significantly ahead of Google’s Tango platform in terms of units shipped, and we expect it to remain out front for the foreseeable future, setting up Apple for long term success in an AR world,” Munster contends, believing forthcoming guidance for the second fiscal quarter will satisfy investors, piquing their excitement for the iPhone X launch come fall of 2017.

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