Some Points Of Focus For Apple's Impending Q4 Print

Analyst's Take: Rewards And Risks

Pelayo's estimates are mostly in line with consensus, except for iPhone shipments, which are below consensus because of potentially softer demand for iPhone 8 and constrained iPhone X ramp. He reiterates a Buy rating on the stock, with a price target of $193. The analyst calculated his price target by applying 15 times 2018 EPS multiple. This multiple is a discount to the market, mega-cap tech and other consumer luxury peer multiples, said Pelayo (see his track record here).

Pelayo expects the stock to trade higher in 2018 on a better product mix driving ASP and faster growth from the services segment. He added that recent news indicates a potentially better Chinese market and PC market, while he sees some risks to December quarter.

Pelayo named the main risks for the stock as potential short-term manufacturing problems and a weaker product mix impacting ASP and margins.

Other risks include:

• Intense competition.
• Rapid technological changes.
• Shifts toward more emerging market demand where Apple's premium pricing could be a headwind.
• Managing a diverse distribution channel.
• Difficulty in receiving continued support from third-party software developers for applications and the required software.
• IP protection and legal resolutions regarding patent infringement cases.
• Worse than expected changes in tax legislation around the globe.
• Unfavorable global and regional economic conditions.