This Expert Thinks The Street May Be Too High On Apple's Bottom Half
Sacconaghi started off the conversation by suggesting that the Street's estimates for the bottom half of 2016 is too high. The Street is modeling an earnings per share print of $9.07 versus his own expectations of $8.75. However, the analyst added that the company's guidance is "what people really care about."
The analyst further questioned if Apple's pricing model of selling its iPhone at nearly four times its competitors is sustainable in a smartphone market that is likely in a declining stage.
"If, ultimately, guidance is a little bit tepid for the second half, I think that question [of sustainability in the business model] will persist."
When asked if Apple's stock is a Buy based on valuation alone at 11x forward P/E, Sacconaghi pointed out that other hardware companies, such as Dell and Motorola began to see declining sales and margin pressure. The analyst followed up that if indeed Apple is seeing declining sales and margin pressure than an 11x forward P/E valuation might be justified.
"I still think there is room for smartphone growth and room for Apple to take share from other players," Sacconaghi said.
Finally, the analyst suggested that Apple will revise its cash return program from $200 billion to $250 billion. A dividend hike is also likely, although it is unclear by how much.
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