As other analysts cut AAPL estimates, Guggenheim stands pat with bullish $215 target

Ahead of Apple's December quarter results, analysts have been slashing targets for the company, based on a belief that iPhone sales are slower than expected. But Robert Cihra of Guggenheim hasn't budged on his $215 price target, telling investors on Wednesday that he sees the iPhone X as the start of a multi-year upgrade cycle.

Cihra did concede that he has heard that iPhone unit growth could be lower than expected. But in a new note to investors, a copy of which was obtained by AppleInsider, he countered that higher average selling prices have typically been a major revenue driver for the company.

With the iPhone X priced at $999 and up, he believes ASPs will be pushed further and help Apple's bottom line.

Cihra sees the iPhone X as the start of a multi-year upgrade cycle, in which Apple will adopt OLED screens, Face ID, and on-device machine learning in all of its handsets.

"Supply chain negativity looks like a buying opportunity to us, particularly as we estimate a lower tax rate likely keeping (earnings per share) in line," Cihra wrote.

Guggenheim first increased its price target to $215 last November. As of Wednesday, shares of AAPL were trading north of $167.

While Guggenheim held steady, other analysts have cut targets ahead of Thursday's earnings report. On Wednesday, BMO Capital Markets downgraded AAPL stock to "market perform," as analyst Tim Long predicted weaker-than-expected sales in the upcoming March quarter.

Appearing on CNBC, Long said Apple is currently between product cycles, which doesn't give investors much to be excited about. He predicted that the company could be in the midst of a 6-to-12-month cycle where the stock "trades sideways."

Apple will report the results of its holiday 2017 quarter after markets close on Thursday. It is expected that the debut of the iPhone X, as well as the first full quarter of availability for the iPhone 8 and iPhone 8 Plus, will represent the company's biggest three-month frame ever — though investors are wary about the iPhone's prospects heading into early 2018.

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15 Comments

maestro64

said about 6 years ago

They keeps saying slow then "expected" but never do they said what is expected and where the numbers came from. It like me saying I expect the Patriots to score less than expected in the super bowl this weekend.

Does that mean they will win or loose?

I Just made a prediction can you prove I was right or wrong

levi

said about 6 years ago

Smart guy. Two trusted analysts I follow, Mark Hibban and Neil Cybart are predicting strong results, in excess of estimates. Neil’s summary analysis is free at aboveavalon.com.

magman1979

said about 6 years ago

We've seen these asinine "predictions" of doom and gloom EVERY, SINGLE, SOLITARY YEAR at this time for the last 8 years+ about Apple, and each time these anal-ysts have been proven dead wrong, but I think in 2018, they may FINALLY be exposed for their stupidity in relying on rumour, innuendo, and ridiculous supply chain checks to justify their idiocy, all in the name to manipulate the stock in pump-and-dump style tactics, which hurt Apple's brand, and the investors foolish enough to follow these idiots!

I truly hope some of these asshats will be taken to task for bluntly LYING as they do, and face the music for this! This has gone on long enough!

Folio

said about 6 years ago

Bank of America Merrill Lynch analyst, Wamsi Mohan, just reaffirmed $220 price target in a 22-page report. Basically Mohan's thesis is Apple has more diverse levers for growth now than in past. Excerpt of p.1 follows:

Discounting no growth in Hardware presents opportunity

Our analysis (Fig 1) suggests that shares of Apple are currently discounting a “declining growth in hardware” scenario (ex-cash and services), which is to us too pessimistic. Assuming $19 in net cash/share, $103/share for a no-growth hardware business and $57/share for a base case services business (Total $179), implies that the stock is already discounting a declining hardware business and a worse than run rate trajectory for services. With tailwinds from tax (we assume 21% rate but there could be more upside), and use of cash optionality, we view shares as particularly attractive. Reaffirm Buy.

Services present a strong secular tailwind

We build up Services revenue from App store, Apple Music, iTunes, Apple Pay, Apple Care, Licensing, iCloud, and other Services (Fig 2). Our detailed breakdown suggests that App store revenues, followed by iCloud will drive the bulk of the near term growth with potential longer term upside from Apple Music and Apple Pay. Given the better gross margin profile of services, we see potential upside to our gross margin estimates.

Don’t write off the hardware just yet as ex-growth

We view the hardware business (ex-services) to show growth over the next several years (18/19 driven by iPhone ASP, 2020 driven potentially by 5G/AR/VR, meanwhile accessories AirPods, HomePod, Apple watch continue to grow as do Macs). If the hardware business does go ex-growth, we think Apple will have room to harvest margins.

iPhones dominate the rhetoric for now

Although we remain below consensus on iPhone units at 228mn (F18), we see upside to ASPs and gross margins (FX, memory pricing tailwinds), which can make for a smoother cycle, and command a higher multiple. Given the concern of a guide down based on lower volumes of iPhone X, we view the setup into earnings as favorable.