Analysts are weighing in on the technology giant Apple Inc. (NASDAQ:AAPL), streaming entertainment giant Netflix, Inc. (NASDAQ:NFLX) and micro-blogging giant Twitter Inc (NYSE:TWTR), as US stock indexes are edging slightly lower ahead of a busy week for corporate earnings.
Apple has been in news for the strong response to its latest iPhones (6S and 6S Plus). However, over the last six months, shares of Apple have dropped by 11.79 percent. Kathryn Huberty from Morgan Stanley weighed in as a response to the impressive iPhone replacement rates.
Huberty maintained an Overweight rating on Apple while raising her price target to $162 (from $155). Huberty’s optimism is attributed to surveys conducted by Morgan Stanley, which show solid market growth and record market share gains for the tech giant. Huberty notes the “surprisingly” robust market demand for smartphones in spite of a volatile macroeconomic environment.
In her report, Huberty writes, “More people expect to purchase a smartphone in the US over the next 12 months than a year ago, despite market maturity.”
According to Huberty, shrinking replacement cycles are the reason behind the growing demand for smartphones. The analyst believes the average lifecycle of a smartphone in the US has decreased by five months. Similarly, replacement cycles are also falling in China, which incidentally is also growing as a percentage of the total market for smartphones. Consequently, more and more iPhone users in US and China are expected to upgrade their iPhones in the next 12 months.
Huberty said, “Further supporting revenue growth, ASPs should rise, particularly in China, where the majority of consumers plan to spend more on their next device. Overall smartphone demand that is up in both the US and China supports our view of 10 percent year-on-year unit growth in CY16.”
For Fiscal 2016, Huberty raised her unit growth estimates for iPhone to 7% as opposed to 3% previously. Her “realistic bull case” contends that the iPhone can see a year-on-year increase of 12%. As per Huberty, the updated unit growth estimates are meant “to better reflect more upgrades and expected share gains at the high end of the market.”
She attributes the better-than-expected performance of iPhones to robust upgrade cycle and the record share gains made by Apple in US and China “as consumers increasingly focus on brand/software over price.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Kathryn Huberty has a 68% success rate recommending Apple with a +23.4% average return per rating when measured over a one-year horizon and no benchmark.
In a research report released today, Canaccord analyst Gregory Miller reiterated a Buy rating on shares of Netflix, with a $120 price target, as the company is scheduled to report its third-quarter earnings results after the market closes this Wednesday, October 14.
Miller wrote, “We expect results to be in line with guidance and consensus. We expect management to offer guidance for 4Q15, which will be critical to the stock’s immediate reaction as investors cue on the trajectory of subscriber net additions both domestically and internationally, and the contribution margins of the streaming business. While we do not expect material changes to the company’s long-term view for the business, we will look for updated commentary regarding new market launches, pricing plans, and potential important decisions on future content investments and attempt to assess their respective impacts on our model. While anticipating the customary volatility around the quarterly earnings release, we believe our long-term thesis of the company continuing to leverage its first-mover advantage through heavy investment in original, exclusive content, and rapid global expansion to create the premier player in the emerging global OTT SVOD market holds.”
According to TipRanks.com, analyst Gregory Miller has a total average return of 6.7% and a 54.9% success rate. Miller has a 51.8% average return when recommending NFLX, and is ranked #523 out of 3775 analysts.
Out of the 28 analysts polled by TipRanks, 19 rate Netflix stock a Buy, 7 rate the stock a Hold and 2 recommend a Sell. With an upside potential of 12.30%, the stock’s consensus target price stands at $124.20.
RBC Capital analyst Mark Mahaney came out today with his views on Twitter, following the news that company will reduce its workforce by 336 employees (8% of global headcount). The analyst reiterated a Market Perform rating on the stock, with a price target of $41, which represents a potential upside of 36% from where the stock is currently trading.
Mahaney wrote, “We are a bit concerned that some of the cuts are in engineering, which could hamper Twitter’s ability to continue growing at a robust pace. Additionally, the company announced that for Q3:15 it will come in at or above the high-end of its previous guidance (Revenue of $545-560MM / EBITDA of $110-115MM), but did not provide further details. We note that the company has come in ahead of both its Revenue and EBITDA guides for four of its five quarters as a public company, thus we do not view this as a shocking surprise. We will update our model upon the formal Q3:15 earnings announcement after the close on October 27.”
According to TipRanks.com, analyst Mark Mahaney has a total average return of 22% and a 63.1% success rate. Mahaney has a 6.2% average return when recommending TWTR, and is ranked #6 out of 3775 analysts.