Credit Suisse Upgrades Apple, 'More iPhones, More Cash'
Kulbinder Garcha of Credit Suisse on Tuesday upgraded shares of Apple Inc. (NASDAQ: AAPL) to Outperform from Neutral with a price target raised to $130 from a previous $110 given a “solid and sustainable” iPhone volume base.
"We raise our earnings per share estimates by 18 percent/20 percent to $9.44/$10.06, given a solid and sustainable iPhone volume base, sizable increase in scope for cash return and earnings per share momentum," Garcha wrote. "We now see $10 earnings per share power in calender year 2016, which drives earnings momentum and our upgrade to Outperform and upside to at least $130."
According to Garcha, Apple will see its total iPhone volumes surpassing the 200 million mark, with 215 million units in calendar 2015 and 213 million in calendar 2016. The analyst adds that based on a proprietary segmentation analysis, Apple's iPhone gross profit margin will stand by at 42 percent, or $18 billion, over 2015 given a 43.5 percent gross margin.
Garcha sees a favorable mix shift towards the 64GB iPhone models, which will lead to the larger storage devices accounting for 52 percent of total volumes in fiscal 2015. Meanwhile, the iPhone 6 Plus device could account for at least 21 percent of the total unit mix in the year.
Garcha also notes that Apple's cash position will total $143 billion by April. Coupled with the company's sustainable $50 billion a year free cash flow, the analyst speculates there is scope to increase its capital cash return program to $200 billion and extend it an additional three years.
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Latest Ratings for AAPL
|Jan 2017||OTR Global||Downgrades||Negative|
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