What Analysts Are Saying Ahead of Apple Earnings

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Apple Inc. (NASDAQ: AAPL) is scheduled to release its most recent quarterly results after the markets close on Tuesday. So far in 2017. Apple is the best performing Dow stock, up 27%, standing above the next closest stock by nearly 10%. Much of this gain has been driven by incredibly positive analyst sentiment, earnings and hype surrounding its product line.

When Apple reports after the close, consensus estimates from Thomson Reuters see earnings at $2.02 per share and $52.97 billion in revenue. In the same period of last year, earnings of $1.90 per share and $50.56 billion in revenue were posted.

24/7 Wall St. has taken a look at what analysts have been saying about the stock ahead of the earnings report.

Credit Suisse took a bullish stance and also noted that the market currently underappreciates Apple’s growth potential. The brokerage firm maintained an Outperform rating for the iPhone giant, but raised its price target to $170 from $160, which compares to a $141.83 prior closing price.

Ultimately, Credit Suisse believes that the market underestimates the gross profit contribution from the Services segment, but more importantly, that it underappreciates its growth potential and the annuity-type business it drives in terms of retention and replacement across the business.

Credit Suisse’s Kulbinder Garcha detailed in the report:

Services doubling revenue by 2020, to rise to 33% of GP. We estimate that with the existing slate of services, Services revenues could rise to $52bn long term from $26bn today (although we believe this will need a more direct video offering) driven by a high quality, affluent, digitally transacting user base of 1.1bn devices and around 650mn users. Given that GMs are around 70% for this business, it would suggest that services will contribute $39bn in GP long term from $19bn today. We see several financial benefits of this. First, we believe it will drive GM over 40% longer term suggesting upside to our projections. Second, it makes the cash-flow stream higher quality. Third, it gives an opportunity and platform from which Apple can launch new services offerings.

RBC Capital Markets reiterated its Outperform rating on Apple, and the firm joined the slew of other analysts raising its targets. RBC’s new price target is $157 per share, up from $155.

RBC’s Amit Daryanani sees several things to watch in Apple’s earnings. First is iPhone commentary, as you would expect. Then there are gross margin numbers to watch, with RBC signaling that Apple sold about 51.9 million iPhones. The firm also wonders if Apple will increase its buybacks with that $200 billion or so cash trove, or maybe a dividend hike. RBC also wants to see if the services part of the business is adding more to the bottom line. And a last issue is whether Apple’s operating costs are expected to keep rising as a percentage of revenue.

A few other analysts weighed in on Apple ahead of the report:

  • Cowen reiterated an Outperform rating with a $155 price target.
  • Wells Fargo reiterated a Market Perform rating with a $140 price target.
  • Piper Jaffray reiterated an Overweight rating with a $155 price target.
  • Needham reiterated a Buy rating with a $165 price target.
  • Stifel has a Hold rating with a $150 price target.
  • Guggenheim reiterated a Buy rating with a $180 price target.
  • Macquarie has a Buy rating with a $160 price target.
  • Goldman Sachs has a Buy rating with a $150 price target.
  • Citigroup has a Buy rating with a $160 price target.

Shares of Apple were last seen up 0.4% at $147.23, with a consensus analyst price target of $148.96 and a 52-week trading range of $89.47 to $147.69.