Goldman Sachs raises Apple price target to $133 from $124

From a note to clients that landed in my inbox Wednesday.

  • We see 3% upside to consensus EPS in FY17 – We estimate FY17 EPS at $9.31 vs. consensus at $9.01 on modestly higher revenues (mostly due to iPad and Watch). We trim our iPhone revenue estimate for FY17 by 2% to account for lower iPhone 7 units (primarily in China) and FX headwinds, partially offset by a mix shift to the iPhone 7 Plus.
  • More bullish on iPhone 8; raising FY18 estimates – There is mounting evidence from the supply chain that the iPhone 8 may be a significantly more innovative device than its two predecessors, with new capabilities such as augmented reality/3D sensing. To reflect that probability, we partially bake in a stronger upgrade cycle and higher ASPs in FY18.
  • Optionality from repatriation and content strategy – With $216bn in overseas cash, Apple would be the top beneficiary in our coverage of repatriation, which would likely be deployed for accelerated buybacks and potentially M&A. We think Apple could use M&A to accelerate its content strategy, consistent with the company’s increased focus on services.

Rating: Buy. Price target: $133, up from $124.

5 Comments

  1. David Emery said:

    AAPL has been on a bit of a tear the last month or so, even after the revelation that Cook, et.al. got their compensation cut for not meeting expectations.

    It’s quite common for stocks in general to rise before earnings (“buy rumor, sell news” 🙂 ). But it seems the potential up-side of iPhone 8 is beating the near-term bad news about Apple’s earnings.

    Of course we’ll see in a couple weeks, and I am -not complaining- about the rise in AAPL. But I do find it surprising.

    1
    January 11, 2017
  2. John Kirk said:

    Apple is slowly, steadily, building a lineup of unique products. Instead of using patents, they’re using integration to make their products un-copyable.

    – Fingerprint Identification (Apple Pay)
    – 3D Touch
    – Apple Watch
    – AirPods

    They’re simultaneously building a moat so no competing technology can enter and an ecosystem palace so no one who enters will ever want to leave.

    1
    January 11, 2017
    • Jonathan Mackenzie said:

      If Apple can tie a useful AR experience into their ecosystem, it may help widen the moat.

      I have no idea what that looks like, but Cook has repeatedly talked up AR. If Apple implements it in a way that leverages all of their devices (with actual use cases, not just imagined by the engineers), the ecosystem would further differentiate itself from Android.

      0
      January 11, 2017
      • John Kirk said:

        I’ve heard several industry commentators talk about the tie-in between AirPods and AR. Apple thinks long term. They put the pieces in place, one-by-one, and then they roll out the benefit that rests upon them. A good example is Apple Pay. Apple meticulously laid the foundation before introducing the product. It wouldn’t surprise me one bit if they are doing the same for AR.

        2
        January 12, 2017
  3. Robert Paul Leitao said:

    Goldman Sachs is clearly looking beyond FY2017 to the much-anticipated iPhone “super cycle” that commences this fall. Although Apple chose to use a similar form for the iPhone 7 series handsets, the new models are jam packed with innovations and enhancements to services. This sets the stage for more conspicuous innovations in next model year’s handsets. In other words, next fiscal year’s super cycle has already been years in the making.

    While the note mentioned the iPad and the Apple Watch lines as FY2017 growth catalysts, the little Apple AirPods will deliver big revenue results this fiscal year, adding well over $1 billion in new revenue.

    It’s understandable Goldman Sachs is cautious on Greater China. Each of Apple’s revenue regions have unique and distinct revenue growth cycles and a return to revenue growth in the region in FY2018 will bolster next fiscal year’s results.

    0
    January 14, 2017

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