Oppenheimer Not Jumping On The Apple Bandwagon Ahead Of Q4 Earnings

Previewing Apple Inc. AAPL's fiscal fourth-quarter results, Oppenheimer said the average selling price boost is unlikely to ease iPhone 7 cycle concerns.

Analyst Andrew Uerkwitz said his 2017 estimates remain materially below the consensus, given expectations for shipment declines in the March and June quarter of 2017 due to waning demand for iPhone 7 and mounting anticipation for the calendar 2017 iPhone refresh. That said, the analyst raised his estimates for the fourth quarter of 2016 and fiscal year 2017 and 2018, given the ASP-boost to iPhone 7 cycle.

Oppenheimer sees little upside from non-iPhone products such as Apple Watch, iPad and MacBook. The firm noted that market research firm IDC forecast a 52 percent year-over-year drop in smart watch shipments to 2.7 million units in the third quarter, with Apple contributing to the biggest drop.

Related Link: As Q4 Report Looms, Don't Forget Apple's Services And App Store Segments

The firm also noted that Apple microphone supplier Knowles Corp KN reported third-quarter outperformance, citing a North American customer's order pull-in for China's October holiday sales. However, Knowles issued conservative fourth-quarter guidance, given lack of better sell-through data from its NA customer and Samsung volatility.

Oppenheimer raised its 2017 and 2018 earnings per share estimate for Apple to $8.30 and $10.84, respectively from $8.12 and $10.63. The revenue estimates for 2017 and 2018 are at $211 billion and $248 billion, respectively, up from $209 billion and $245 billion. The firm also raised its fourth-quarter 2016 earnings per share and revenue estimates based on higher iPhone ASP and shipment assumptions.

As such, Oppenheimer has a Perform rating on the shares of Apple.

Ahead of the results, Apple's shares are up 0.25 percent at $117.94.

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