Investors Aren't Fully Appreciating Dynamics Of Tech Data's Relationship With Apple

Loop Capital Markets said in a note Wednesday that the market hasn't yet fully appreciated the dynamics of Tech Data Corp TECD's Apple Inc. AAPL relationship. The comments came close on heels of Tech Data's fiscal year second-quarter earnings announcement.

The firm has a Buy rating and $120 price target for the shares of Tech Data, with the price target representing 30-percent upside from current levels.

At the time of writing, shares of Tech Data were rallying 1.98 percent at $94.12.

Analyst Ananda Baruah noted Apple currently accounts for about 12 percent of Tech Data's revenues, with revenue contribution from Apple having been as high as 24 percent in the past depending on the iPhone product cycles.

The analyst said he believes Tech Data is likely well-positioned ahead of the iPhone 8 launch, given that Apple cleared $3.3 billion of high-end iPhone inventory in its June quarter.

See also: The Street Isn't Recognizing The Strength Of Tech Data's Apple Ties

On the Apple connection, Loop Capital Markets highlighted the following:

• Tech Data's normalized iPhone revenues account for one-third of the revenues it gets from Apple.
• Tech Data sells the complete product portfolio.
• The company continues to gain share within Apple itself.
• Tech Data is a very important partner for Apple, driving Mac into commercial environments. Apple's CEO Tim Cook touted this to be a $15 billion opportunity.

Reviewing Tech Data's fiscal second-quarter results, Loop Capital Markets noted that the company's 2018 guidance, as well as the guidance implied by the 2019 framework, were essentially in line.

The firm said the framework Tech Data provides — regarding how it is positioned to monetize all thing Advanced Tech related — would be an important undertaking in the next six to eight quarters. The firm noted that the company is focused on incorporating the cloud and cloud services capabilities it acquired with Avnet, Inc. AVT into its services and go-to market offerings.

"It will increasingly be key for investors to understand the various levers and specifics of how TECD is positioned to monetize Analytics, the ongoing push of computing power to the edge, as well as Public / Private / Hybrid Cloud services and infrastructure, across both larger and smaller customers," the firm said.