Top analysts are sharing their two cents on Apple Inc. (NASDAQ:AAPL) and Verizon Communications Inc. (NYSE:VZ) amid slowing AAPL share gains and following VZ’s senior leadership sell-side event yesterday. Let’s delve a little deeper:
Apple, though in the first four weeks of its iPhone 7 launch the tech giant made great share strides, in the last month, the gains have fallen a little by the wayside in face of a limited supply of the limited iPhone 7 Plus, particularly considering that in North America, the Pixel and additional Android smartphones are recapturing market share. Nonetheless, top analyst Michael Walkley at Canaccord remains confident on the giant, as his recent surveys have shown that aside from the Plus models, the iPhone 7 models are in “adequate” supply across SKU’s and locations he checked.
Therefore, Walkley reiterates a Buy on shares of AAPL with a $140 price target, which represents a close to 21% increase from current levels.
What is the root of the problem? The analyst explains, “Somewhat impacting iPhone sell through trends is that demand continues to outstrip supply for the iPhone 7 Plus models.”
However, the analyst notes, “Despite our modest estimate reductions, we believe the iPhone installed base should exceed 570M customers exiting C2016, and this impressive installed base should drive strong future iPhone replacement sales and earnings, as well as cash flow generation to fund strong long-term capital returns. We still anticipate a stronger upgrade cycle in F2018 with the 10-year anniversary iPhone 8 likely released in September 2017. Therefore, we maintain our bullish F2018 iPhone estimates given our belief a new form factor will drive very strong upgrade sales within the large and loyal iPhone consumer base.”
Overall, “Given the easier growth comps for the iPhone 7 versus the somewhat disappointing iPhone 6s sales, we still anticipate iPhone unit sales should return to slight year-over year growth throughout F2017 with improving year-over-year growth in F2018 with the iPhone 8 launch. Further, we believe investors are already starting to focus more on the iPhone 8 growth potential versus near-term iPhone 7 sales trends leading us to maintain our BUY rating,” Walkley surmises.
In face of reduced iPhone unit projections, the analyst subsequently is reigning in EPS estimates for the financial year of 2017 from $8.90 to $8.78 and for the financial year of 2018 from $10.08 to $10.02.
Michael Walkley has a very good TipRanks score with a 63% success rate and he stands at #31 out of 4,285 analysts. Walkley garners 14.8% in his yearly returns. When recommending AAPL, Walkley earns 22.3% in average profits on the stock.
TipRanks analytics exhibit AAPL as a Strong Buy. Out of 32 analysts polled by TipRanks in the last 3 months, 27 are bullish on Apple stock and 5 remain sidelined. With a return potential of 14%, the stock’s consensus target price stands at $132.66.
Verizon Communications Inc.
Top analyst Mike McCormack at Jefferies remains sidelined on Verizon and highlights key takeaways after attending yesterday’s sell-side event hosted by Verizon leadership, where the corporate team discussed merger and acquisition possibilities, 5G, wireless fundamentals, as well as mobile video/advertising.
First, McCormack underscores that on the heels of AT&T’s acquisition of TWX coupled with the latest press reports, CEO Lowell McAdam has indicated VZ will not have the necessity to acquire a large content provider. Moreover, the analyst believes, “Management is pleased with the progress of AOL (revenue up 10%), and indicated that the company was taking a patient approach with recent investments, including go90, Fleetmatics, and smart city initiatives.”
Another positive for VZ points to Boston, as the analyst adds, “The company’s dense fiber build in Boston opened commercially a week ago, and management is encouraged by the early feedback.”
Secondly, the analyst speculates on VZ’s aggressive moves in 5G as it gains “access to spectrum,” a strategy which imparts “a head start” over the competition.
Thirdly, in regards to wireless fundamentals, McCormack asserts, “Management is confident the company is maintaining share, with 3Q handset weakness attributed to Samsung issues and the device mix; the company expects to be handset positive in 4Q.”
Fourthly, the analyst comments, “Verizon continues to build ad systems around brand advertising, which could benefit from the Yahoo acquisition.”
Lastly, McCormack concludes with further takeaways that stood out above the rest, from management expectations for wireless margins to continue their acceleration forward, “capital spending appetite is greater in a Trump administration,” and finally, “tax reform and potential deregulation are positive for Verizon.”
For now, though positive on the takeaways, the analyst reiterates a Hold rating on VZ with a price target of $53, which represents a just under 2% increase from where the shares last closed.
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 Mike McCormack has achieved a high ranking of #50 out of 4,285 analysts. McCormack upholds an 83% success rate and realizes 13.4% in his yearly returns. When suggesting VZ, McCormack gains 6.8% in average profits on the stock.
TipRanks analytics demonstrate VZ as a Buy. Based on 11 analysts polled by TipRanks in the last 3 months, 3 rate a Buy on VZ stock, while 8 maintain a Hold. The 12-month average price target stands at $54.33, marking a 3% upside from where the stock is currently trading.