Apple (AAPL) Estimates Raised at Drexel Hamilton

October 26, 2016 8:46 AM EDT
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Drexel Hamilton analyst Brian White reiterated a Buy rating and $185 price target on Apple (NASDAQ: AAPL) following solid Q4 results and strong Q1 guidance. The firm slightly raised estimates following the print.

White highlighted:

  • Last night, Apple delivered a solid 4Q:FY16 performance and offered up a strong 1Q:FY17 outlook that has the company returning to revenue growth. We are slightly raising our EPS estimates and maintaining our 12-month price target at $185.00.
  • Apple remains our top pick for H2:2016 given our view that the sales, profit and iPhone cycle have bottomed, while valuation remains depressed and we expect the iPhone 7 cycle will return the iPhone franchise to growth. We anticipate iPhone unit growth to return in FY:17 and the we believe the iPhone 8 can drive another year of growth in FY:18.
  • Apple reported 4Q:FY16 sales of $46.85 billion (down 9% YoY as reported) that beat our estimate of $46.05 billion (Street was at $46.89 billion), while pro forma EPS of $1.67 beat our $1.59 projection (Street was at $1.65).
  • Apple has enjoyed a strong iPhone 7/7 Plus launch thus far with demand exceeding supply, especially for the iPhone 7 Plus that has the new dual-camera feature. Given this strong launch, we are now projecting iPhone unit growth to return a quarter earlier than we had previously modeled with a 2% YoY increase in 1Q:FY17, followed by 6% growth in FY:17 and 9% growth in FY:18.
  • Apple reported iPhone unit sales of 45.5 million in 4Q:FY16 that beat our estimate of 44.05 million. This 5% YoY decline in iPhone units improved from the 15% decline in 3Q:FY16 and the down 16% in 2Q:FY16 that we believe was the trough of this cycle. For the iPad, units of 9.27 million beat our 8.9 million projection and Mac unit sales came in at 4.89 million units and above our 4.59 million projection.
  • For 1Q:FY17, Apple expects sales of $76-78 billion that is above the Street (Street is at $74.94 billion), while gross margin is expected at 38-38.5% (we were at 40.0%). Using the midpoint of Apple's 1Q:FY17 outlook, we calculate EPS of approximately $3.17 (Street is at $3.17). We are increasing our 1Q:FY17 revenue estimate to $77.61 billion from $73.99 billion and raising our EPS projection to $3.22 from $3.18. For FY:17, we are slightly increasing our EPS projection to $9.27 from $9.25.

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $118.25 yesterday.

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