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Maxim Trims Apple Estimate, Keeps Target Above $150/Share

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Maxim's Nehal Chokshi trimmed Apple Inc. AAPL 6.4%'s estimates, citing the likelihood of another revenue miss from the company before the iPhone 7 cycle kicks in.

Chokshi cut his June quarter EPS estimate by 22 percent to $1.33 (consensus was $1.76) and FY16 EPS view by 8 percent to $8.05 (consensus was $9.03). The analyst also slashed FY16 revenue estimate by 3 percent to $213 billion, while consensus revenue estimate was $226.71 billion.

Chokshi cut his FY16 gross margin forecast to 37.7 percent from 39 percent due to the mix shift away from high margin iPhones and the iPhone SE launch.

Related Link: 5 Positives And 5 Negatives From Apple's Earnings Report

However, the analyst maintained his FY17 revenue estimate of $239 billion (consensus $240.09 billion) as "we expect demand that is slipping out from the iPhone 6S cycle to be largely re-captured in the iPhone 7 cycle."

Yet, the analyst lowered his FY17 EPS estimate by 3 percent to $9.68 (consensus was $9.95) and cut price target by to $157 from $162. Chokshi, however, has a Buy rating on Apple shares.

Although Apple saw higher upgrade rates for 6S versus 5S, it was lower than the 6 and that resulted in year-over-year iPhone unit declines. The analyst said June quarter guidance implies iPhone sales to fall in the range of 15 to 17 percent y/y, and Chokshi models a sell-out of 40.8 million units.

"iPhone Tock (6S) lifecycle extension may drive another miss for June Quarter, but iPhone tick (iPhone 7) will drive lifecycle compression," Chokshi wrote in a note.

"Further, from a y/y comparison, there is an effective tick-tock on lifecycles that mirrors AAPL's iPhone design cycle with the S releases (the tock) bringing an effective expansion of lifecycle and the form factor change (the tick) bringing an effective compression of lifecycle," Chokshi elaborated.

As such, the analyst said iPhone 7 will be a strong growth year, even without Android switchers.

Apple shares were recently seen down 6.4 percent at $97.68.

Apr 2016Brean CapitalMaintainsBuy
Apr 2016BarclaysMaintainsOverweight
Apr 2016CitigroupMaintainsBuy

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