Oppenheimer Says Apple Quarter Will Be Robust, Fears Are 'Overblown'

In a report published Thursday, Oppenheimer analysts Andrew Uerkwitz and Martin Yang preview the results for Apple Inc. AAPL’s third quarter, which will be announced next Tuesday. According to the note, they expect another beat-and-raise quarter on the back of robust iPhone sales – amidst a quarter of disappointing Android flagship handsets sales.

The experts consider this as “further evidence that more consumers are choosing mobile computing platforms rather than handset features.” In this line, they believe Android-based devices do not count with a cohesive platform, and thus expect the breach between Android and iPhone to continue to enlarge. In fact, the analysts believe they are seeing “the beginning of the end of the Android flagship phones. Like Apple's dominance of the high-end PC market, the same is being repeated in the handset market,” they assure.

Below is a breakdown of three key points to Oppenheimer’s thesis:

• This quarter could bring early returns for consumer adoption of Apple Pay, Apple Music, Apple TV, and Apple Watch. While none of these have a significant impact on the company’s top and bottom lines, they serve the purpose of increasing the appeal of Apple’s ecosystem – versus Android’s.
• iPhones should continue to drive growth as they go on to snatch market share from high-end Android devices and penetrate the Chinese market.
• Although Apple Watch estimates have been conservative, the impact of the device on the company’s overall performance will remain unimportant for sime time still.

The analysts are now expecting revenues of $48.7 billion and earnings of $1.73 per share for the third quarter – below consensus of $49.092 billion and $1.79 per share.

Oppenheimer says it would remain a buyer of Apple’s stock ahead of the quarter and for the long term. Thus, they maintain an Outperform rating and $155.00 price target on the shares.