U.S. stock futures point to a lower open on on Thursday as traders eyed the morning’s release of data and digested comments from European Central Bank’s Mario Draghi. Among the equities in focus are tech giant Apple Inc.(NASDAQ:AAPL) and Facebook Inc (NASDAQ:FB). While Piper Jaffray analyst prepares to Apple’s annual developers conference, WWDC, Cantor analyst explains why he believes Messenger will be the next significant growth driver for FB. Let’s take a closer look.
Piper Jaffray analyst Gene Munster is one of Apple’s biggest bulls, and he is also one of the top analysts rated who cover the stock. Today, Munster came out with a few insights ahead of Apple Worldwide Developers Conference (WWDC) 2016, which will take place on June 13-17 in San Francisco.
Munster reiterated an Overweight rating on shares of Apple, with a price target of $153, which implies an upside of 55% from current levels.
Munster wrote, “The opening keynote typically focuses on software updates, particularly iOS, and we expect this year’s focus to be the same. We believe the main news out of this years WWDC will be around opening up Siri for deeper voice control in iOS and updates to Apple Pay (either at WWDC or in the fall) with more incremental updates to iOS, OS X, WatchOS, and tvOS. Overall, we view WWDC as a warm up to more meaningful announcements in the fall including iPhone 7 and an updated Apple Watch. AAPL remains our top large cap pick with a $153 price target and continue to believe investors will look favorably at easier comps starting late this year.”
“We believe investors will look more favorably on AAPL shares as we get closer to the iPhone 7 launch and revenue growth returns to positive. Its been a rough slide for Apple’s growth this year, with revenue down 13% in Mar-16, an estimated down 15% in Jun-16, and down 10% in Sep-16. The decline was driven by the difficult comps caused by the iPhone 6 in 2015 along with an iPhone 6S that had only marginal improvements, and a slowdown in China. Looking forward to 2017, we expect Apple to grow topline at 12% compared to down 8% in 2016,” the analyst continued.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Gene Munster has a yearly average return of 18.4% and a 64% success rate. Munster has a 18% average return when recommending AAPL, and is ranked #5 out of 3990 analysts.
Out of the 48 analysts polled by TipRanks, 44 rate Facebook stock a Buy, 3 rate the stock a Hold and 1 recommends a Sell. With a return potential of 20%, the stock’s consensus target price stands at $142.42.
Cantor analyst Youssef Squali reiterated a Buy rating on shares of Facebook, with a price target of $150, as he believes that Messenger, Facebook’s standalone chat app, could drive $1.6 billion of ad revenues to the social giant.
Squali stated, “While FB’s primary focus will remain on the user experience, and a wider launch of ads on Messenger is expected to be rolled out prudently over time, we estimate that Messenger could generate ~$1.6B in annual revenue over the next couple of years. We note that our projection reflects only ad revenues, not ecommerce at this point. Also, our estimate is based on today’s monthly active users of ~900M, core Facebook mobile ARPU of $13.36, and Messenger ARPU of $1.82 (in proportion to time spent/engagement metrics vs. core Facebook).”
Bottom line: “We view the rapid growth of Facebook’s messaging platforms, Messenger and WhatsApp as setting the stage for the company’s next multi-billion dollar opportunities.”
According to TipRanks.com, analyst Youssef Squali has a yearly average return of 13.9% and a 66.0% success rate. Squali has a 46.8% average return when recommending FB, and is ranked #10 out of 3990 analysts.