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Apple's Near-Term iPhone SE Strength Offsets 6s/6s Plus Weakness

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Apple's Near-Term iPhone SE Strength Offsets 6s/6s Plus Weakness
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Apple Inc. (NASDAQ: AAPL) is scheduled to report its F3Q16 results on July 26. Credit Suisse’s Kulbinder Garcha maintained an Outperform rating on the company, with a price target of $150, saying Apple should be able to sustain “elevated levels” of earnings and FCF in the long term.

The Credit Suisse revenue and EPS estimates for F3Q16 are $41.2 billion and $1.39, versus consensus expectations of $42.3 billion and $1.38, respectively. “Given high retention rates, a superior ecosystem, and multi product compute advantage, we believe such elevated levels of earnings and FCF of ~$65bn should be sustainable long term,” Garcha wrote.

Related Link: Barclays Lowers Apple's Price Target From $121 To $115, Sees Near-Term Pressure

iPhone SE Strength Offsetting 6s/6s Plus Weakness

Supply chain checks indicate near-term iPhone SE strength would likely offset softness in the remaining iPhone portfolio. Garcha projected iPhone SE units of 10 million for the quarter. He expects total iPhone units to come in at 40.7 million, representing a 14.4 percent year-over-year decline and a 20.5 percent sequential decline. Results are likely to have been impacted by an inventory drawdown.

The unit estimate for 2016 is at 207mn, representing a 10.8 percent year-over-year decline. The iPhone cycle is likely to remain subdued for the next few quarters, the analyst mentioned. He expects the iPhone business to recover slightly to 215 million in 2017, and accelerate to 250 million in 2018.

“Specifically, we believe installed base growth, which has grown 80% since 2013, should drive unit growth beginning with the iPhone 7,” Garcha added.

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Latest Ratings for AAPL

DateFirmActionFromTo
Oct 2016Goldman SachsMaintainsBuy
Oct 2016Credit SuisseMaintainsOutperform
Oct 2016PiperJaffrayMaintainsOverweight

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