Maxim Trims Apple Estimate, Keeps Target Above $150/Share

Maxim's Nehal Chokshi trimmed Apple Inc.
estimates as the analyst sees another revenue miss from the company before the iPhone 7 cycle kicks in. Chokshi cut his June quarter EPS estimate by 22 percent to $1.33 (consensus was $1.76) and FY16 EPS view by 8 percent to $8.05 (consensus was $9.03). The analyst also slashed FY16 revenue estimate by 3 percent to $213 billion, while consensus revenue estimate was $226.71 billion. Chokshi cut his FY16 gross margin forecast to 37.7 percent from 39 percent due to the mix shift away from high margin iPhones and the iPhone SE launch. However, the analyst maintained his FY17 revenue estimate of $239 billion (consensus $240.09 billion) as "we expect demand that is slipping out from the iPhone 6S cycle to be largely re-captured in the iPhone 7 cycle." Yet, the analyst lowered his FY17 EPS estimate by 3 percent to $9.68 (consensus was $9.95) and cut price target by to $157 from $162. Chokshi, however, has a Buy rating on Apple shares. Though Apple saw higher upgrade rates for 6S versus 5S, it was lower than the 6 and that resulted in year-over-year iPhone unit declines. The analyst said June quarter guidance implies iPhone sales to fall in the range of 15 to 17 percent y/y, and Chokshi models a sell-out of 40.8 million units. "iPhone Tock (6S) lifecycle extension may drive another miss for June Quarter, but iPhone tick (iPhone 7) will drive lifecycle compression," Chokshi wrote in a note. "Further, from a y/y comparison, there is an effective tick-tock on lifecycles that mirrors AAPL's iPhone design cycle with the S releases (the tock) bringing an effective expansion of lifecycle and the form factor change (the tick) bringing an effective compression of lifecycle," Chokshi elaborated. As such, the analyst said iPhone 7 will be a strong growth year even without Android switchers. Apple shares are currently trading at $98.28, down 5.82 percent.
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