Apple: Color on Quarter
- AAPL down 8% near $96 premarket... the stock found support near $95 in February and Aug '15 corrections... AAPL now has a $532 bln market cap and trades at 11.6x FY16 EPS Capital IQ Consensus... Semi ETF SMH indicated 1.5% lower premarket.
- RBC cuts tgt to $120 from $130. The June-qtr guide was exceptionally disappointing but they think valuation provides support in mid 90's near-term but for AAPL to sustain multiple expansion investors need to get comfort regarding iPhone 7 being a game changer and enabler of rev acceleration. From a stock perspective, as they lap the tough iPhone 6 compares and head into iPhone 7 launch, they should see return of growth in Dec-qtr that along with a modest uptick in gross-margins should enable AAPL to drive EPS growth (buybacks should also help).
- Mizuho notes Apple reported F2Q revenues below expectations and toward the low-end of guidance. EPS came in below consensus with revenue downside driving margins lower. While risk to F3Q16 was anticipated, guidance implies significant deceleration and margin pressure. However, they look beyond the current cycle and remain grounded in their analysis of customer LTV supporting a fundamental value of the stock meaningfully higher than current levels. Reiterating Buy rating and $120 on attractive risk-reward.
- Cowen cuts tgt to $125 from $135. While optically hard to defend and maybe range-bound near-term, their call here is unchanged. They areaggressive buyers <$100 and feel the market will look back on this as the last estimate cut ahead of a little better than expected iPhone 7 cycle providing a bridge to a new "cycle of innovation" with OLED in '17. They see risk/reward >2:1 to upside at <$100. They note inventories have been vleared; fundamental price/demand elasticity for iPhone that remains very strong (SE unit demand is well ahead of supply) and this is likely the last estimate cut.
- Stifel is reducing their F2016-F2018 rev and non-GAAP EPS estimates by an average of 4% and 7%, respectively, following Apple's weak F2Q16 results and F3Q16 outlook (channel inventory burn considered). Based on a belief investors could consider a current trough non-GAAP EPS (including stock-comp) in the range of $8/sh. and their updated (6% reduced) estimate of $9.42/sh. for C2017, while they see downside into the $90/sh. range (~7.5x ex-cash P/E vs. ~9x median), they maintain their $120/sh. price target (10x ex-cash P/E on C2017 est; ~7x EV/EBITDA). Given their analysis/views on Apple's iPhone installed base expansion (>625M), they remain positive on the set-up into late-2016 / 2017.
- Maxim lowers tgt to $157 from $162. iPhone Mar Q units miss their estimate by 2% on a sell-out basis. June quarter guidance implies iPhone sell-out likely down 15% to 17% y/y, 6% weaker than their prior estimate. While they are not lowering their FY17 revenue estimate ($239B, up 12% y/y, up 2% over FY15), they are shifting revenue slightly from iPhone (less inventory build) to services which is impacting gross profit estimate by 1%. Combined with lower projected net interest income, they are slightly lowering their FY17 EPS estimate by 3% from $9.90 to $9.68 (consensus was $9.95).
- Needham expects AAPL to trade down today because it missed FY2Q16 consensus income statement metrics and lowered guidance for FY3Q16. What they liked about the quarter was: 1) accelerating services growth (to 20% y/y up from 15% last quarter); 2) capital return program increased by $50B, including a dividend increase of 10% (to $0.57/share); 3) Operating Free Cash Flow of $11.6B implying an annualized FCF yield of 8-10%; 4) iPhone units sales were 51.2 mm (better than their est of 50mm, and well above bear estimates). They view the tough y/y iPhone comps, strong currency headwinds, and $2B inventory drawdown as temporary issues, suggesting upside in FY2H16. They are buyers on weakness.
- Oppenheimer downgrades to Perform.
- Goldman cuts tgt to $136 from $155; removed from Conviction Buy; reiterate Buy rating
- Piper Jaffray cuts tgt to $153 from $172
- BMO cuts tgt to $117 from $130
- Macquarie lowers tgt to $112 from $117