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Apple Has Late 2016-2017 Upside, Stifel Says

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With Apple Inc. AAPL 1.1% scheduled to report its F2Q16 earnings on April 26, Stifel’s Aaron C. Rakers believes the focus would remain on “iPhone 7 driven upside potential into late-2016/2017.”

The analyst maintained a Buy rating on the company, with a price target of $120.

F2Q Expectations

“With a focus on Apple’s iPhone installed base expansion, we believe in-line results and guide, coupled with a capital allocation update, would be viewed as a positive catalyst,” Rakers mentioned.

Rakers expects Apple to report its 2Q16 revenue and EPS mostly in-line with the consensus, although the 3Q16 revenue and EPS might come in below expectations.

Although the BOM reviews have created concern among investors regarding the GM percent implications of iPhone SE, the analyst believes that the company’s depreciation cycle suggests a sustained total GM percent range of 38-40 percent.

iPhone

Following the decline of 14 percent year-on-year in China mobile phone exports in 1Q16, Rakers believes that iPhone shipments, ex-China, would be in the low-30 million range, implying a year on year decline of 30-35 percent.

In addition, the MIIT published data is in-line with the estimate of 15 million iPhone shipments for mainland China and 22 million for Greater China.

“Our analysis of highly correlated country-level macro data to iPhone ship leaves us comfortable with F2Q16 est. of ~52M iPhones; low-40M range for F3Q16,” Rakers pointed out.

The analyst also mentioned, however, the investors expects an update on the $250 billion capital allocation.

DateFirmActionFromTo
Apr 2016BarclaysMaintainsOverweight
Apr 2016BTIG ResearchMaintainsBuy
Apr 2016NeedhamInitiates Coverage onStrong Buy

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