Apple (AAPL) PT, Estimates Cut at RBC Capital But Sees Stock Working Higher Through 2016
RBC Capital analyst Amit Daryanani lowered estimates and his price target on Apple (NASDAQ: AAPL) to $130.00 (from $140.00) while maintaining an Outperform rating. The update reflect supply chain data points coupled with the reality that compares will be challenging in the near term.
"We are lowering our Mar-qtr iPhone units to 45M units (prior 54M) to reflect incremental softness and recent production cuts," Daryanani commented. "Our sense is that iPhones are likely sitting at higher than optimal inventory across multiple geographies, and as a result, AAPL has implemented further production curtailment across the supply chain. While we recognize that the “noise” surrounding AAPL will keep the stock range-bound until we are done with Mar-qtr, we maintain our Outperform rating on AAPL, as we expect demand to recover and y/y growth to resume in Jun-qtr (accelerating) in H2:16. At current levels (~8x FTM P/E ex-cash), we believe Apple remains an attractive asset to own for CY16 especially, as we get beyond Mar-qtr guide."
The firm is modeling Mar-qtr revenues of $50.0B and EPS of $2.07 (vs. Street at $58.5B/$2.37). The firm's model assumes iPhone units of 45M units in Mar-qtr (-26% y/y and –40% q/q) vs. Street modeling Mar-qtr iPhone shipments at ~58M. For FY16 their estimates are now at $229.1B/$9.36 (vs. Street at $241.9B/$9.71), as AAPL should ship ~217M iPhones in FY16 (-6% y/y). They are leaving Dec-qtr estimates unchanged at $76.7B/$3.18, which imply ~76M iPhone shipments.
The analyst remains positive on the stock, saying while "noise" currently surrounds AAPL's Mar-qtr iPhone units, they think the stock should work appreciably higher through CY16 driven by: (1) higher ASP’s across iPhones; (2) iPad Pro to drive ASP’s higher; (3) potential 4" iPhone refresh that could target new price points; (4) higher gross margins—AAPL typically enjoys 150bps+ higher gross margins during an "s" cycle; and (5) they expect buybacks to remain robust on the back of high FCF.
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Shares of Apple closed at $100.70 yesterday.