AAPL : NASDAQ : US$97.99 BUY
Technology — Communications Technology — Wireless Equipment
APPLE DELIVERS WITH PORTFOLIO OF INNOVATIVE PRODUCTS AND SERVICES; FEATURES
CONSISTENT WITH RFIC, SEMI SUPPLIER THESES
We believe Apple delivered a portfolio of impressive new products with the 4.7”
iPhone 6, 5.5” iPhone 6 Plus, and two Apple Watches, along with innovative
services such as mobile payments and health-related services. Based on our
analysis of global iPhone sales by region, we believe consumers slowed the
pace of iPhone upgrade purchases during the iPhone 5 and 5s product
cycles, and we believe the extended replacement rates combined with new
larger-screen iPhones position Apple for record iPhone 6 sales. While we
anticipate limited initial supply of the iPhone 6 Plus and were slightly
disappointed the Apple Watches will not ship until C2015, we keep our
estimates above consensus, and reiterate our BUY rating and $112 target.
While Apple’s product launches were consistent with our expectations in
terms of hardware products, we believe the event met lofty investor
expectations. Further, we believe the increased focus on software and
services could result in a higher multiple longer term.
In the near-term, our supply chain analysis and conversations with global
distributors indicate the channel is preparing for a record iPhone 6
launch, and we anticipate strong sales of the 4.7” iPhone 6 during the
December quarter. However, we believe the 5.5” iPhone 6 will ship in
limited volume through the end of C2014 due to supply constraints, but
this could result in strong March quarter follow-through sales with an
improved ASP and margin mix. We were impressed with the Apple Watch
products, but initial shipments in C2015 were later than our belief a
couple million could ship in C2014.
We have slightly reduced our iPhone ASP assumptions, added the Apple
Watch products to our forward estimates, and slightly increased iPad
estimates given our expectation for a new 9.7” iPad.
This results in our
F2015 EPS estimate increasing from $7.50 to $7.55, and we are introducing our F2016 EPS estimate of $7.92.
Our $112 price target is based on shares trading at roughly 14x our F2016 EPS estimate.