Apple Still Worth $146; Canaccord Pounds The Table

• Apple Inc. AAPL shares have been under pressure, and are down 20 percent since July 27.
• Canaccord Genuity’s T. Michael Walkley maintained a Buy rating for the company, with a price target of $146.
• Apple is poised to perform well and post robust results, despite soft global trends in the smartphone market, Walkley stated.

Apple reported in-line F1Q16 results, driven by strong iPhone sales and continued growth in its services. The company reported revenues and EPS of $75.9 billion and $3.28, respectively. Forex headwinds, however, played spoilsport and restricted the company’s sales for the quarter.

Analyst Michael Walkley mentioned that soft global trends in the smartphone market indicate that iPhone sales in the first half of 2016 could be down y/y. He added, however, that Apple could return to y/y growth with the launch of iPhone 7.

“Overall we believe the current iPhone 6 and iPhone 6s products should continue to post strong sales and high-end smartphone market share gains, as we believe only 40% of the installed iPhone user base has upgraded to the iPhone 6/ 6S smartphones and Apple continues to take premium tier market share with Android users switching to the iPhone,” Walkley wrote.

Apple’s revenue from Greater China grew 14 percent y/y, despite tough growth comps and macro and currency headwinds. The analyst expects the increase in the company’s iPhone installed base to drive strong replacement sales, earnings and cash flows in the future.

“While we anticipate softer 1H/C2016 trends as Apple is facing tougher growth comps from the strong iPhone 6 sales combined with continued f/x headwinds, we anticipate Apple can continue to generate strong earnings and cash flows,” the Canaccord report stated.

The EPS estimates for C16 and C17 have been reduced from $9.35 to $9.27 and from $10.46 to $10.43, respectively.