I remain of the view that Apple's (AAPL) last significant phone product upgrade cycle is nearing completion and that neither the watch nor Apple Pay will move the corporate needle.
Moreover, with the high-end smartphone market maturing, an elongated upgrade cycle augurs poorly for the sustainability of current margins (with an average selling price closing in on $700 for the iPhone).
Apple's current market capitalization is close to $800 billion this morning.
I have a small short in this name, but plan to get more aggressive at current levels.
Here is a complete synopsis of Apple commentary this morning:
- Brean Capital raises its AAPL tgt to $170 from $160. Said it believes Mar Q results are proof positive that its Buy thesis has teeth. Specifically, it continues to believe that Street numbers are materially low through 2017. Fundamentally speaking, it believes company stands to deliver material EPS upside from 1) iPhone ships through 2017, 2) favorable GM from both iPhones and iPhone mix and 3) materially more Opex $ leverage through at least 2016 as AAPL realizes the benefits from the recent iPhone 6 and iWatch investment cycles. AAPL should continue to return material capital over the next few years that can both catalyze and provide a floor under the stock.
- FBR Capital notes Apple delivered a solid March quarter/June guidance accompanied by its massive capital return program expansion to $200 billion (from $130 billion previously), and believes the company remains well positioned to further capitalize on fertile growth areas (e.g., Apps, Apple Pay, etc.), with Apple Watch, its solid iPhone 6 product cycle, and China representing major growth opportunities over the coming quarters/years.
- RBC Capital Mkts raises its AAPL tgt to $150 from $142. Mar qtr results came in materially ahead of consensus and buyside expectations driven by robust iPhone demand. AAPL conservatively guided June qtr in line with expectations. They see i) sustained momentum with iPhone despite the seasonal lull (~20% of install base has migrated), ii) room for gross-margin expansion vs. initial Jun qtr guide, iii) Revamp and uptick in AppleTV (June-15 likely), and iv) Apple Watch contributions starting June qtr but likely accelerate through CY15.
- Mizuho raises tgt to $125 from $115. While it is impressed by the company's performance in 2Q and its potential to keep expanding its reach in emerging markets, it remains on the sidelines due to potential headwinds. It thinks iPhone sales are likely to decelerate meaningfully over the next few quarters creating headwinds for the stock. Although Watch sales are likely to ramp, they are unlikely to offset the void left by slowing iPhone sales and they will likely be margin dilutive.
- Stifel maintains Buy rating and $150 target following Apple's strong reported results and in-line F3Q15 outlook; its forward revenue estimates remain relatively unchanged and EPS moves slightly higher to reflect GM% increase and larger share repo authorization.
- Oppenheimer notes Apple delivered another strong quarter, beating consensus with better-than-expected iPhone sales. The company saw strength in emerging markets, where sales grew 58% Y/Y. Oppenheimer continues to believe Apple will gain share as it's in the middle of its best product cycle driven by its compelling ecosystem. It raised FY15/FY16E EPS from $8.73 and $9.76 to $8.94 and $10.37, respectively, based on updated iPhone sales estimates and adjustments for the new share repurchase program. It took up iPhone estimates, but admittedly, it sees much slower unit y/y growth. So, it assigned a lower multiple as they believe investors will have to be comfortable with slower growth with near-perfect execution; $155 tgt.
- Maxim notes iPhone channel inventory commentary implies management expects, at best, a 27% q/q decline in iPhone unit sell-through, worst ever. Update to capital return program is simply an extension of current rate from end of CY15 to end of CY17. Projecting a 3% y/y decline in FY16 revenue due to extending iPhone life cycles in mature markets and digestion period in Greater China; Hold.
- Piper Jaffray raises target to $162 from $160.
- Cantor target to $195 from $180.
- Susquehanna to $155 from $150.
- BMO to $145 from $135.
- Nomura to $133 from $129 -- time for stock to take a breather
- Baird to $155 from $135.