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Credit Suisse Reviews Apple's Earnings

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In a report published Tuesday, Credit Suisse analysts maintained an Outperform rating on Apple Inc. (NASDAQ: AAPL), with a price target of $145, saying that a prolonged product cycle is in play.

The company reported healthy F2Q15 results, with strength "across the board." Its revenues and EPS beat the analysts' and Street's estimates by 2.4 percent and 3.5 percent, respectively.

The analysts believe that the current "elevated levels of earnings and FCF of $72bn per annum" should be "sustainable long term," in view of the high retention rates, a superior ecosystem, and multi-product compute advantage.

iPhone volume in the quarter was 61.2mn, representing 39.9 percent y/y growth, but down 17.9 percent sequentially. ASPs were at $659, up 10.6 percent y/y.

Related Link: Apple Earnings Live Blog: Q2 Conference Call

The iPhone unit estimates for CY15 and CY16 have been raised to 239.5mn and 240.9mn, respectively. "We believe these strong results combined with an improved mix shift in iPhone mix will grow iPhone GP over 45%, or $20bn in FY15," the analysts said.

Apple's capital return program in the quarter rose to $200bn. FCF jumped 74.6 percent y/y to $16.7bn. "Management increased the cash return program to $200bn and extended the program through March of 2017. With $80bn having been already deployed, that means over the next two years Apple is set to return ~16% of their market cap," the Credit Suisse report mentioned.

The analysts believe that there are three additional levers for upside:

  1. Gross margins of 40 percent at the corporate level could prove conservative, since the analysts do not take into account "leverage from increased sales" or "scope for expansion as cost curves on new products improve."
  2. The numbers do not reflect any "significant impact" from new products or monetization of services, such as Apple Pay, Beats, HealthKit and HomeKit.
  3. The Apple Watch estimates of 9mn units in FY15 and 28mn in FY16 as well as the ASP estimate of $550 could prove conservative.

Latest Ratings for AAPL

Oct 2017KeyBancUpgradesSector WeightOverweight
Oct 2017BarclaysMaintainsEqual-Weight
Sep 2017PiperJaffrayMaintainsOverweightOverweight

View More Analyst Ratings for AAPL
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Posted-In: Credit SuisseAnalyst Color Reiteration Analyst Ratings


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