Apple (AAPL) Revenue Guidance 'a Source of Relief', BMO Capital Says
BMO Capital analyst Keith Bachman reiterated an Outperform rating and $145 price target on Apple (NASDAQ: AAPL). While the analyst had expected weakness in revenue guidance, Applel's guide was only about 80 bps lower than consensus at the midpoint.
"Against a wall of worry created by the supply chain, we think Apple’s rev guide is a source of relief," the analyst said.
The analyst added, "We are raising our FY16 EPS estimate to $10.12 from $9.83. We are maintaining our target price of $145, based on a P/E of 14-15x and EV/FCF of 9-10x our FY16 estimates. We believe Apple will generate 90 million new subscribers (including switchers) in FY16, which we calculate to be the growth in the installed base. Further, we assume about 150 million upgrades, or two-thirds of total iPhone sales in FY16. We found it interesting that Tim Cook mentioned that new users in China were more than 50% of unit shipments, and we believe this is likely the case for all emerging markets. We believe that China’s percentage of iPhones is at least 25% of the total. Therefore, our assumption that new sub adds represent about one-third of iPhone shipments seems reasonable, if not conservative, given Apple’s comments on iPhone shipments in China."
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Shares of Apple closed at $114.55 yesterday.