'NEW ENERGY': Analysts are bullish about Apple's strong Q4 earnings

Tim Cook
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  • Apple reported its fourth-quarter earnings on Thursday.
  • It beat Wall Street's expectations, with strong results across all of its product lines.
  • The forecast for Q1 2018 is also good, and most analysts are upping their price target for the stock.
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Apple announced its earnings for the fourth quarter of 2017 on Thursday, and blew past analysts' expectations.

The company displayed strength across all of its key product lines — iPhone, iPad, and Mac — reporting profits of $10.7 billion (£8.1 billion) on $52.6 billion (£40.2 billion) of revenue.

The firm sold 46.7 million iPhones, 10.3 million iPads, and 5.4 million Macs, and briefly crested a $900 billion (£689 billion) market capitalisation in the after hours, with shares up 3%.

Apple's services experienced particularly strong momentum, with a 34% increase year-over-year (YoY), 18% quarter-over-quarter (QoQ), and a $8.5 billion (£6.5 billion) in revenue, which would put it at no. 95 on the Fortune 500 list.

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The company is especially bullish about the next quarter, too, in anticipation of the upcoming holiday season; CEO Tim Cook said that the company is "literally firing on all cylinders," with strong revenue guidance ranging from $84 to $87 billion (£64-£66.5 billion).

The new flagship product, the iPhone X, goes on sale today (Friday 3 November).

Keep reading to see a complete roundup of analysts' reactions to Apple's Q4 earnings, but first, here is a recap of the key numbers:

Revenue: $52.6 billion (£40.2 billion) versus $50.7 billion (£38.8 billion) expected

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iPhone unit sales: 46.7 million versus 46 million expected (up 2% YoY)

Adjusted EPS (GAAP): $2.07 (£1.58) vs $1.87 (£1.43) (up 24% YoY)

Q1 2018 forecast: $84 billion (£64 billion) to $87 billion (£66.5 billion), with a midpoint slightly above the $85.2 billion ($65.2 billion) expectation.

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UBS: BULLISH

Rating: Buy

Price target: $190 (previously $180)

Comment: "There is new energy in the story given the feature leap in iPhone 10,
improving results for the Mac and iPad, and outstanding services and wearables results.
Growth in Greater China (including services) is important with China a swing factor in
F18. We increase our F18 EPS estimate from $11.40 to $11.65 with $12.50 in F19."

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Nomura: BULLISH

Rating: Buy

Price target: $185 (as it was)

Comment: "Apple closed FY17 on a solid note then offered healthy guidance for the first
quarter of the iPhone X. Recent supply chain improvements allay concerns of severe supply constraints. We expect consensus to come towards our high-end estimates. We retain our $185 target, and begin to ask... what is next?"

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Deutsche Bank: BULLISH

Rating: Hold

Price target: $152 (previously $140)

Comment: "We continue to view Apple as a trading stock, and believe shares will trade at the higher end of their historical range while current market multiples are elevated and the iPhone X remains in short supply. We are raising our price target to $152 from $140 on higher market multiple, but maintain our Hold rating given our more conservative long-term view."

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Citi: BULLISH

Rating: Buy

Price target: $200 (previously $170)

Comment: "We are increasing our financial model slightly as detailed in this report as well as adjusting our valuation multiple to 15x from 13.5x as the entire equity market has increased in valuation and as a result we increase our target price to $200 from $170 previously and reiterate our Buy rating. The stock is currently trading at 15x F12MPE (14x excluding cash) compared to the S&P500 at 18.4x and we do not believe this 15%+ discount to the market is warranted. Inside this report we detail out the 5 reasons Apple stock can trade higher despite the stock up +47% year to date compared to the S&P500 up +15%."

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Piper Jaffray: BULLISH

Rating: Overweight

Price target: $200

Comment: "Despite potential for ongoing uncertainty around inventory availability for
iPhone X, we recommend owning AAPL on potential for a strong overall FY18 iPhone cycle, rising ASPs and a favorable services revenue trajectory. Reiterate OW rating and $200 PT on AAPL."

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Barclays: NEUTRAL

Rating: Equal weight

Price target: $162 (previously $161)

Comment: "We expect Apple's stock to retain its momentum status in the near term. Important questions were left unanswered related to the IPX adoption cycle, the bulls are likely to cheer the better Dec-Q guide, strong services number, and the rebound in China as
placeholders for only better trend-lines in 1H C2018. In our view, three big questions were not addressed: 1) Why doesn't Apple disclose a pre-order IPX units number? 2) Are IPX wait times due to really strong demand or bigger-than-usual supply challenges? 3) Will price elasticity be in effect after the early adopters fade in coming quarters?"

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Morgan Stanley: BULLISH

Rating: Overweight

Price target: $200

Comment: "We see iPhone X unlocking pent-up iPhone upgrades, especially in China, driving 20%+ iPhone unit growth and Revenue and EPS 15-16% above consensus in FY18.
Accelerating growth in China contributed to the clean Sept Q print and Dec Q guidance which is supportive of our thesis. Remain OW."

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Bank of America: BULLISH

Rating: Buy

Price target: $180

Comment: "In our opinion, it is too early to call the demise of the iPhone X despite limited
commentary on the earnings call as the first selling date is Nov 3rd. Investors will watch the sell through data and determine if the mix, margin trajectory can support an upside case of $12+ in C18 EPS based on higher ASP and margins. Our estimate of $11.91 assumes solid sell through and a material step up in the ASPs of the iPhone."

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Macquarie: BULLISH

Rating: Outperform

Price target: $168

Comment: "The bottom line is that Apple is dominating high-end smartphones and associated Services. Our bullish view of X is driven by the fact it is the most innovative iPhone in years, and that the more limited innovation of iPhone 7 still led to 215mm phone sales. Services growth, while still driven by broader app sales, also has more drivers, including Music, iCloud, Search, Apple Pay and more. Finally the new disclosure that Wearables is the size of a Fortune 400 company, and that Apple Watch sales grew over 50% 3 qtrs in row, highlights another category that is adding to overall growth. We reiterating our Outperform and raising our PT to $188."

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Drexel Hamilton: BULLISH

Rating: Buy

Price target: $208

Comment: "We are very pleased with Apple's 1Q:FY18 outlook and especially in light of the supply constraints around the iPhone X. For 1Q:FY18, Apple expects sales of $84-87 billion (Street is at $85.97 billion), while gross margin is projected at 38.0-38.5% (we are at 38.5%). Using the midpoint of Apple's 1Q:FY18 outlook, we calculate EPS of approximately $3.71 (Street is at $3.81). We are projecting 1Q:FY18 sales of $84.86 billion and EPS of $3.65."

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William Blair: BULLISH

Rating: Outperform

Price target: $171.50

Comment: "Bottom line, we maintain our confidence in Apple following the company’s fourth-quarter results. At an after-hours price of $171.50, Apple trades at 16.1 times our fiscal 2018 GAAP EPS estimate of $10.63. We maintain our Outperform rating."

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Guggenheim: BULLISH

Rating: Buy

Price target: $215 (previously $200)

Comment: "Apple up-sided with Sep-qtr revs $52.6B (+12%Y/Y) and EPS $2.07 (+24%Y/Y) vs. consensus $50.7B/$1.87, with 46.7mil iPhones slightly > our 46.0mil forecast. More importantly, it guided Dec-qtr revs $84-87B, which a) we think is still conservative and b) at the mid-point would be +63%Q/Q vs. its 5yr avg +59%Q/Q and so signals new high-end iPhone X production constraints are not holding it back. Moreover, gross margin guide for 38-38.5% implies no iPhone X ramp penalties. Reiterate BUY and raise our price target to $215 from $200, as we continue to see Apple setting up for its biggest iPhone up-cycle in 3 years, driven by pent-up demand + multi-year OLED rollout + meaningfully higher ASPs. Double-digit unit growth times double-digit ASP increases drives our forecast for ongoing reacceleration, and we continue to believe FY18E consensus revenue of $266B is far too low, increasing our own forecast another +$7B to $286B for +25%Y/Y growth. We increase FY18E EPS another +52c to $11.79."

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BTIG: BULLISH

Rating: —

Price target: $198 (previously $184)

Comment: "We increased our price target to $198 from $184 based on 18.0x (was 17.5x) our calendar 2018 EPS estimate of $11.00 (was $10.50). Apple has accelerated revenue growth for the past four quarters, reaching 11% before the iPhone X has even launched. We increased our revenue growth expectations in 2018 to 11% from 7.6%, a critical milestone. Double digit revenue growth is an important hurdle for growth investors, and is typically rewarded with a higher valuation multiple."

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GBH: BULLISH

Rating: Highly attractive

Price target: $205 (previously $190-200)

Comment: "In a nutshell, with what we believe is a super cycle product now on the horizon, Cook and Apple have major tailwinds into 2018 which should expand the multiple and growth rate. While we maintain our Highly Attractive rating, we are raising our valuation target to $205 from our previous target range of $190 to $200 based on our increased confidence in the iPhone X demand cycle."

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RW Baird: BULLISH

Rating: Outperform

Price target: $190 (previously $175)

Comment: Reiterate Outperform rating. Yesterday after the close AAPL reported strong FQ4
results, with guidance also above expectations, which should allay worst-case supply concerns. We expect strong X demand to continue into C2018, elongating the current upgrade cycle. Additionally, Watch units grew 50%+ YOY and organic services revenue grew 24.3%. Increasing estimates, and raising our target price from $175 to $190.

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