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BMO Previews Apple Earnings: 'OLED On Time But Limited'

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BMO Previews Apple Earnings: 'OLED On Time But Limited'
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Breaking from the view held by many other Apple Inc. (NASDAQ: AAPL) analyst, BMO Capital Markets’ Tim Long believes that the iPhone 8 will ship on time in September, although in limited supply, rather than be delayed until October.

Long reiterated an Outperform rating and $170 price target.

A Look At Q3 Earnings

Apple is set to report its third-quarter earnings on Aug. 1 after the market closes.

Long expects to see sales come in at around $45.7 billion, about $80 million above the consensus view.

Despite the slightly bullish sales estimate, Long expects EPS to be slightly below consensus at $1.55 due to slightly lower margins.

Like most Apple followers, the analyst believes the company will reveal two new phones, a standard “S” upgrade and a higher-end “iPhone Pro.”

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“We believe the models will be announced and available for pre-order simultaneously … in September,” said Long in a note.

The new iPhone is widely assumed to be featuring an edge-to-edge OLED display, but has been a sticking point for production ramps.

Related Link: Apple's Next iPhone Launch Cycle Might Resemble That Of iPhone 4

Looking Forward: ‘Stock-Outs’ To Continue

“We believe production capacity will continue to ramp throughout the December quarter,” said Long, but the analyst expects the company to continue expecting supply of the new phones to run out through the first half of calendar year 2018.

Long cut back his estimates for Q4, and now expects sales to be $46.94 billion, $300 million below consensus.

Long sees EPS for fiscal 2017 and 2018 above the Street’s forecasts, at $8.90 and $10.89 respectively.

Production Woes May End Soon

Apple is currently completely reliant on Samsung for the production of OLED screens, but recently bought special machinery used to produce them, according to an ET News report.

The machines will be used in a research and development facility Apple is setting up in Taiwan, dedicated to OLED technology.

It’s unlikely Apple will seek to produce the screens itself. The company has a history of licensing and leasing its equipment to other companies, like Foxconn, which produce the needed components.

Regardless of the formal setup, Apple may soon see significant easing in its OLED supply constraints.

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DateFirmActionFromTo
Apr 2018Morgan StanleyMaintainsOverweightOverweight
Apr 2018Monness Crespi HardtInitiates Coverage OnBuy
Mar 2018BarclaysMaintainsEqual-WeightEqual-Weight

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