Needham: Apple’s Long-term Value is $180 per share

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Apple Inc.’s stock has suffered enough for the past few months, especially due to the latest products that it launched along with the saturated smartphone market.

The clock is ticking for Apple Inc., as the smartphone market has started to saturate, as many skeptics suggest as well. However, it is looking for alternatives to tackle this problem; we know that other avenues that the tech giant is going towards include electric vehicles. An upward trend in the stock of the technology company is expected in the long-term as it aims to explore these potential opportunities.

In a note investors, a bullish stance have been given by one of the financial firms that covers the stock of Apple, Needham and Company. Laura Martin, an analyst at Needham and Company has stated in the investors note that given the iPhone maker’s dominance in the market, it is likely to take up the task of creating a novel digital network with the help of smartphones; she further stated that currently the tech company is in the best position to take up on this task.

As per the survey conducted by Ms. Martin, the findings suggest that the company’s annual churn rate is currently at 12% which means that there is presently less competition and hence more pricing power along with stream revenues. She has given a long term value of $180 per share to the technology organization which indicates a 62% increase from the current levels. She has based her valuation on the following points:

As per her findings, Apple is currently above both social media company leader Facebook Inc. and world class content leader, Disney. She stated that the profit margins of Apple are higher than that of both of these companies in the past five years. She believes that the iPhone maker should not be evaluated as only a hardware company. According to this methodology, she believes that Apple stock is likely to be traded at $200 per share.

Comparing the company with cable companies, the analysts stated that similar to how these cable companies have recurring subscription business models, Apple also has bundles in its hardware that include software, services, content (Siri). However, she analyzed that if we take the company is one of the cable organization; the stock should be valued at $180 per share.

The analysts surveyed over 300 iPhone users, and she found out that on average these users usually stay on apple’s ecosystem for at least eight years. Another thing she found out was that 1.3 IOS devices are used by these customers, which means that 1 billion active devices are being used by over 770 million customers in total, all across the world.

However, the financial services and research firm, Needham and Company has maintained a Strong Buy rating on the stock of the iPhone manufacturer along with a 12-month target price of $150. The stock already has been under a lot pressure after launching its ‘not so appealing’ products recently. In an attempt to attract customers again towards its products, the company launched iPhone SE priced at $399 in emerging markets such as China and India (mainly because it was a low-priced smartphone in comparison to how its products are usually priced).

Presently the stock of the tech giant is being traded in the market for a share price of $109.62.

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Apple Inc’s iPhone Sales Dying Down

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The technology giant need to up its game as people are not interested in buying and upgrading their iPhones anymore.

Apple Inc. has released its first quarter of fiscal year 2016 financial report. For the longest time, the iPhone has been the reason why the technology company has always been able to report profits. Presently, according to the earning’s report, even for the latest quarter; profits have been reported due to the iPhone but it can be observed that the love for the flagship device is now dying down amongst the once regulars.

According to the earnings report, the company has managed to beat the last year’s profits of $18 billion as it reports profits of $18.4 billion. However, it managed to underperform the expectations of the analysts at Wall Street as it posts iPhone sales units of 74.8 million while in the same quarter in the previous year it sold over 74.5 million units of the device. In financial terms, this shows a year over year growth of just 1%.

IPhone accounts for as much as two thirds of the company’s revenue but at this point the management of the Silicon Valley giant has admitted that in the future this slow growth is likely to happen. The 1% year over year growth in unit sales is a first ever for the company. The chief executive officer, Tim Cook of the giant blames the slow growth on the ‘strength of the dollar’ and ‘global recession’, according to Bidness Etc. He said during the earnings conference call that the company has been seeing extreme conditions all around; something that they have never witnessed before.

We believe that the this low growth is mainly due to in the slow growth and the economy crisis in China and secondly iPhone users had a different perspective of iPhone 6 and 6S in mind – which was released back in September 2015. He thought that the device will have massive changes in features but unfortunately it seemed to be quite similar to the iPhone 5 and hence was not convincing enough for the users to upgrade their smartphones.

It is against the norms of the company to reveal the iPhone sales estimates of the subsequent quarter but this time Tim Cook did just that on Tuesday. He still believes that there is massive growth potential as there are emerging markets that the tech organization needs to tap. Additionally, to tackle the question on the saturation of the company’s smartphone market; the CEO stated that most of the Chinese consumer who bought the product were first time smartphone buyers. On this he added that because of this reason he believes that there are still a huge number of people who will be the first to buy smartphones and that is the market share the company will work on getting.

Mr. Cook informed on the conference call that most of the huge sales were being generated from the Chinese regions but the future growth of these regions seems a little uncertain. For the upcoming month of March, the smartphone maker is estimating revenue of $50 to $53 billion – these figures show a drop in the revenue in comparison to the same quarter in the previous year. Everyone had hoped that the other products in the Apple product line might be able to revive the declining sales, but unfortunately they failed to do so but the Apple Watch has shown promising results for the quarter.

 

Apple Inc. Gets An Overweight Rating By Pacific Crest

Pacific Crest Securities where the company’s stock has been given an Overweight rating considering the sector weight.

Pacific Crest Securities where the company’s stock has been given an Overweight rating considering the sector weight.

Apple Inc. the tech giant has been upgraded by the Pacific Crest Securities where the company’s stock has been given an Overweight rating considering the sector weight. At this point, the 12 month target price is kept at $142. Considering the current price levels, the company’s target price signifies an upside potential. The tech behemoth has been successful in beating the estimates made by analysts in terms of Earnings per Share (EPS) and revenues during the fourth quarter as portrayed in the earnings report.

As per the report, the company was successful in selling 48 million units of the Apple iPhone in the fourth quarter which relates to the consensus estimates. The revenues for the company accumulated to $51.5 billion which is relatively ahead of the estimations made by Street which said $51.3 billion. Moreover, on a year over year basis there has been 23% growth. The analysts at Pacific Crest claim that the average selling price which was better than expectations for the iPhone has actually compensated for the staggering selling price of Mac.

According to the analytical firm, the brand equity of AAPL along with the substantial share of the company in the Smartphone industry is actually good enough to give it a strong position in the market in terms of pricing. This will actually assist the company in enjoying healthy margins while maintaining the constant “topline growth”.

As per Pacific Crest Securities, since early July, the price to earnings ratio for Apple (P/E) has actually flattened by almost 12% and almost 20% on a year to date (YTD) basis. This has actually given birth to concerns by the investors since the adoption rate for the company’s Apple Iphone 6s has been extremely sluggish. This has already been considered while drafting the stock price. The firm at this point expects that the March quarter might pose some vulnerability but the EPS and Revenues will further accelerate once the Iphone7 cycle starts.

Considering the company’s strong guidance for the first trimestral., the estimates have now been revised up by Pacific Crest for the sales of Iphone that is now 75.9 million units from 66.9 million for the quarter that ends in December. They have also given the EPS estimate for the complete year to be $10.30 for the fiscal year of 2017 that shows almost 9% growth with the iPhone 7 cycle.

Thus considering the prospects Apple stock have been upgraded to an Overweight rating.