Apple Can 'Grow Again' Next Quarter

Following solid Q4 2016 results and Q1 guidance, Drexel Hamilton’s Brian White believes Apple Inc. AAPL could return to sales growth a quarter earlier than estimated.

White maintained a Buy rating on the company, with a price target of $185.

“Apple remains our top pick for H2:2016 given our view that the sales, profit and iPhone cycle have bottomed, while valuation remains depressed and we expect the iPhone 7 cycle will return the iPhone franchise to growth,” the analyst mentioned.

Solid Q3

The company reported its Q4 sales at $46.85 billion and pro forma EPS at $1.67, both metrics coming in ahead of the estimates, with EPS beating guidance as well.

Gross margins for the quarter were slightly ahead of estimates at 38 percent, while operating margins of 25.1 percent also beat estimates.

Apple reported beat operating profit of $11.76 billion, with operating cash flow of $16.1 billion.

iPhone units stood at 45.5 million for Q4, ahead of the estimate of 44.05 million, representing a 5 percent year-on-year decline but an improvement over Q3 2016.

Q1 Guidance

“In our view, Apple's 1Q:FY17 outlook is strong with sales growth expected to return a quarter sooner than expected and a very positive sign with the iPhone 7 ramp,” White stated.

Apple guided to sales of $76-$78 billion for Q1, above the consensus and the estimate, with gross margin guidance of 38.0-38.5 percent.