Apple: Color on Quarter
- Apple (AAPL) is +8% at $118 in the premarket (market cap ~$694 bln). AAPL blew away expectations as it sold a staggering 74.5 mln iPhones; the quarter is reminiscent of the Steve Jobs era when the iPhone and then iPad initially took off. The $18 bln in net income is a corporate record. AAPL hit an all time high at $119.75/share in late November.
- Cowen raises tgt to $115 from $113. A big beat on already elevated expectations + guide that would have been ~$0.10 above their numbers (~$0.20 above St) ex-FX is a great outcome. That said, it is hard to pay for a Dec beat in late Jan and their F2015 EPS ex- the beat does not move up. Net/net, Apple Pay + Watch expands the narrative but an elongated 6/6+ tail will have to key further EPS increases from here.
- Mizuho believes, although slightly better than expected, upside from iPhone and its continued momentum is largely priced in. While opportunity to further penetrate the user base and attract new users will likely help shipments, tough compares created by current quarters could make it harder for the continued upside surprise that is required for the stock to work. Additionally lack of significant margin leverage could act as a headwind for the stock. At the current level, risk-reward seems to be well-balanced; Neutral ($115 tgt).
- RBC notes Apple reported blow out numbers. In addition, gross margins overcame 100bps of FX headwinds and was above the high-end of guidance at 39.9% (high end of guide at 39.5%). Looking forward they still see multiple catalysts on the horizon: 1) Apple Watch: will begin selling in April of 2015, 2) Capital Allocation: with additional cash on its books we see upside to dividends and buybacks, 3) Apple Pay: continued penetration of contact-less payment processing and 4) Corporate Penetration: by expanding its presence in the Enterprise they see potential upside iPad, iPhone and Mac products.
- Oppenheimer notes Apple's F1Q15 shattered heightened Street expectations. They believe that their thesis on AAPL is playing out, that AAPL's ecosystem will drive share gain over OEMs focusing on specs. They see record level new customers, Android switchers and growth in China as strong support for their thesis. They expect Apple to keep beating exp. in coming quarters as new products and services grow in 2015 to strengthen its ecosystem.
- Monness Crespi & Hardt raises their AAPL tgt to $125 from $115 based on their revised estimates, iPhone 6 momentum, Apple's entry into the fast-growing Phablet market, the launch of its mobile payment platform (Apple Pay), and entering a new product market in wearable technology with Apple Watch in April.
- Stifel notes iPhone sales in China were up 2x yr/yr (~12-14M iPhones) w/total BRIC growing 97% yr/yr. Apple noted that iPhone 6/Plus penetration stands in the low / mid-teens as a % of the total iPhone subscriber base. In addition to iPhone momentum / upside, which some are likely to debate as being somewhat anticipated, believe the company strong GM% at 39.9% and F2Q15 guide at 38.5%-39.5% (including a 100 bps FX headwind) should be viewed as an incremental positive; $130 tgt.
- Additional target raises:
- JP Morgan to $140 from $112
- BMO to $130 from $123
- Cantor tgt to $160 from $143
- Goldman to $130 from $124
- Bernstein to $135 from $122
- Deutsche Bank to $110 from $102
- Susquehanna to 145 from 135