FBR Maintains Apple At Outperform On 'Strong' iPhone Momentum

In a report published Tuesday, FBR analyst Daniel H. Ives maintained a Buy rating and price target of $185 on Apple Inc. AAPL. The estimates for the company has been raised due to expectations of continuing strong iPhone momentum, despite the overhang in China. While the analyst expects iPhone shipments to grow in F3Q15, macro concerns regarding China, combined with concerns regarding the success of the Apple Watch, could lead to continuing overhang on the stock in the near term, with the share price already having dipped about 5 percent since the F2Q15 results were announced. "We view the last few months as a "speed bump" for Apple's stock/multiple, as ultimately we see more legs to the iPhone 6 product cycle than the Street is anticipating for the next few quarters with China as a major driver of top-line growth, coupled by new products starting to pave the way for future avenues of consumer penetration heading into FY16/FY17," Ives stated. The analyst expects the company to capitalize on the "white-hot momentum" in China in F3Q15 to penetrate further into that region with the upcoming iPhone 6s/7 product cycle. According to the FBR report, "Apple has a number of fertile product areas/services for both its developed and emerging markets with the potential for new product categories that could further expand the ecosystem over the next 12 to 18 months." The analyst expects Apple Watch revenues to account for as much as 8 percent of the total revenues for FY17, despite the bumpy start to sales, with expectations of 5 million units being sold in F3Q15. The revenue and pro forma EPS estimates for F3Q15, FY15 and FY16 have been raised from $47.8 billion and $1.72, $230.3 billion and $8.93, and $247.1 billion and $9.58 to $49.2 billion and $1.79, $233.3 billion and $9.06, and $250.1 billion and $9.69, respectively.