Apple (AAPL) Is At The Bottom - Drexel Hamilton

Drexel Hamilton analyst, Brian White, acknowledges problems for Apple (NASDAQ: AAPL) in the coming quarter but thinks investors will look through to the iPhone 7 upgrade cycle. In addition to the product cycle, there's the potential for an enhanced capital return program and new geographic opportunities (e.g., India, Tier 3-5 cities in China).

The analyst acknowledges end of the iPhone 6-Series cycle and facing difficult iPhone comparisons, and is modeling a YoY decline in sales, profits and iPhone units in 2Q:FY16. For 2Q:FY16, he is modeling sales of $52.34 billion (Street is at $51.97 billion) and EPS of $1.99 (Street is at $2.00). This sales estimate represents a 31% QoQ decline (the weakest March quarter on record that goes back 18 years) and much weaker than the five-year average QoQ decline of 17% over past March quarters. Recall, Apple's 2Q:FY16 outlook calls for sales of $50-53 billion and implies EPS of approximately $1.94 at the mid-point of this revenue outlook.

The analyst believes a bottom in the operating profit cycle occurs in 2Q:FY16 and a trough in the sales cycle in 3Q:FY16. For 2Q:FY16, he is modeling iPhone units of 48.05 million and this 21% YoY decline represents the trough.

No change to Buy rating or $200 PT.

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 $105.68 yesterday.

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