Why Analysts Are Growing More Bullish on Apple After Earnings

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The most recent earnings report from Apple Inc. (NASDAQ: AAPL) was at first deemed a disappointment, but after analysts had a closer look at it they were very positive on the stock. Although, it is hard to be negative on the best performing Dow Jones Industrial Average stock of 2017.

24/7 Wall St. has compiled many analyst notes on Apple after the earnings report. We have included some highlights from the earnings report, as well as what analysts said afterward.

The iPhone giant said that it had $2.10 in earnings per share (EPS) and $52.9 billion in revenue, versus consensus estimates from Thomson Reuters that called for $2.02 in EPS and revenue of $52.97 billion. In the same period of last year, Apple posted EPS of $1.90and $50.56 billion in revenue.

In terms of its products, Apple reported as follows:

  • iPhones: Shipped 50.76 million units with revenues totaling $33.25 billion, compared with 51.19 million units last year and $32.86 billion in revenue.
  • iPads: Shipped 8.92 million units with revenues of $3.89 billion, versus 10.25 million units and $4.41 billion in revenue.
  • Macs: Sold 4.20 million units with revenues of $5.84 billion in revenue, versus 4.03 million units and $5.11 billion in revenue.
  • Services: Posted $7.04 billion in revenue, up from $5.99 billion year over year.

In terms of guidance for the fiscal-third quarter, the company expects to see revenues in the range of $43.5 billion to $45.5 billion with a gross margin of 37.5% to 38.5%. The consensus estimates are $1.62 in EPS and $45.57 billion in revenue for the current quarter.

Merrill Lynch’s Wamsi Mohan reiterated a Buy rating and $155 price objective. The firm noted some overhangs from Qualcomm and from margins, but the investment rationale said this:

We rate Apple a Buy on potential upside from 1) Continued long-term opportunity in China, 2) potential share gains from the release of a lower-end iPhone, 3) strength in the upcoming iPhone 8 cycle, 4) optionality in cash balance, revenue sources like Apple Pay, Apple Watch, home/health kit, etc., that will take time to mature.

Credit Suisse reiterated its Outperform rating and kept its $170 price target. The firm noted that the iPhone super-cycle is just around the corner. The firm’s Kulbinder Garcha noted that Apple’s services thesis remains intact and that Apple’s capital return was raised as expected — Apple increased the capital return program by $50 billion to some $300 billion by March 2019.

FBN Securities reiterated its Outperform rating, but its Shebly Seyrafi raised Apple’s price target to $160 from $155. The report noted that Other (which includes the Apple Watch) revenue grew by 31% and was 27% above consensus. Also cited was that iPad and Mac beat consensus, while Apple’s services continues to grow well.

Here’s what a handful of other analysts were saying about Apple after the report:

  • Argus reiterated an Outperform rating with a $160 price target.
  • Deutsche Bank reiterated a Hold rating but raised its price target to $130 from $125.
  • Morgan Stanley reiterated an Overweight rating with a $161 price target.
  • Piper Jaffray reiterated an Overweight rating and raised its price target to $158 from $155.
  • BTIG reiterated a Buy rating and raised its price target to $184 from $165.
  • BMO Capital Markets reiterated a Buy rating with a $160 price target.
  • Goldman Sachs reiterated a Buy rating and raised its price target to $164 from $150.

Shares of Apple closed Friday at $148.95, with a consensus analyst price target of $151.44 and a 52-week trading range of $89.47 to $148.98. Overall, shares ended the week on a positive note, up 3.7% despite a seemingly negative earnings report.