RBC Raises December iPhone Estimates To 79 Million Units, Ups Price Target To $117

RBC Capital’s Amit Daryanani raised the December quarter iPhone unit estimate for Apple Inc. AAPL on expectations that FQ1 would have an extra week.

Daryanani maintained an Outperform rating on the company, while raising its price target from $115 to $117.

Accounting For An Extra Week

“We estimate an extra week will result in ~5-6M incremental iPhone units for Dec-qtr and should enable a path towards iPhone unit growth starting in Dec-qtr,” the analyst explained.

Although this would be a “transient” impact, which would create a more significant quarter-on-quarter decline in the March quarter, in the near term, it's expected to make the model look more attractive, with year-on-year growth resuming in the December quarter.

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In addition, it should add 200-300 bps of incremental growth, on a year-on-year basis, in FY17.

“We continue to think AAPL should work higher over the foreseeable future given: 1) expectation of easier compares, 2) new product launch and 3) stable to improving gross-margins,” Daryanani stated.

December Quarter Estimates

The analyst now expects iPhone units of 79 million for the December quarter, implying 6 percent year-on-year unit growth, ahead of the consensus forecast.

Revenues are expected at $78 billion, up 66 percent quarter on quarter and 3 percent year-on-year.

The EPS estimate has been raised from $3.06 to $3.29, based on expectations of gross margins of 38.9 percent and operating margins of 30 percent.

“Our updated numbers also reflect extra week benefits for Macs, iPads, and Services revenue as well,” the analyst elaborated.

The FY17 revenue and EPS estimates have also been raised to reflect the extra week in a historically strong December quarter.

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