Apple Analysts On Q4 Results, iPhone 12 Product Cycle, Buying The Dip

Apple Inc. AAPL reported strong fiscal-year fourth quarter results Thursday, although iPhone revenues came in softer than expected.

The Apple Analysts: Wedbush analyst Daniel Ives maintained an Outperform rating on Apple with a $150 price target.

Credit Suisse analyst Matthew Cabral maintained a Neutral rating and $106 price target.

Morgan Stanley analyst Katy Huberty maintained an Overweight rating and $136 price target.

Raymond James analyst Chris Caso reiterated an Outperform rating and increased the price target from $120 to $140.

Needham analyst Laura Martin has a Buy rating and $140 price target.

Wedbush Says Purchases Slow Ahead Of iPhone Launch: Apple's iPhone segment coming in short of expectations should not come as a shock, as the iPhone 12 launch was delayed by four to six weeks from the typical release date, Ives said in a note. 

Customer buying paused ahead of the iPhone 12 launch, especially in the key China region, the analyst said. 

"With pre-order activity tracking more than 2x vs. the iPhone 11 a year ago based on our analysis from Asia suppliers, we believe iPhone 12 is off to a robust start out of the gates and should translate into a massive holiday quarter for Cook & Co. with clear supercycle-like momentum into 2021," he said. 

Wedbush said it would be a buyer on any weakness.

Credit Suisse On Apple Positives, Pushbacks: The strong growth in iPad and Mac revenue, a pickup in Wearable revenue and reacceleration in Services revenue are positives, Cabral said in a note.

The analyst said he expects continued strength in iPad and Mac revenue given benefits from work from home, remote learning, and the uplift from recent product launches.

Apple's outsized China weakness — a result of the launch timing, channel drawdown and a tougher comparison; iPhone declines; and a modest downtick in Services margin are drawbacks, he said.

Growth excluding the iPhone was solid, Cabral said. 

"While we're bullish on 5G longer-term, we remain more guarded out of the gate given limited coverage/capacity and the lack of a 'killer app,'" the analyst said. 

Related Link: Apple Analysts Say It's 'Difficult For Investors To Step Away' With Further Upside Potential

Morgan Stanley Says Confidence In Apple High: With Apple entering fiscal year 2021 with its strongest product and services portfolio in years and several tailwinds at its back, confidence in Apple's ability to retain existing users, attract new ones and accelerate growth and profitability has never been higher, Huberty said in a note. 

Even without the full impact of new product and services, Apple is growing by double digits in every category, with overall revenue growth of closer to 30% after adjusting for the timing of new iPhone model shipments compared to a year ago, the analyst said.

"We'd be buyers on any weakness post-earnings and continue to view iPhone 12 lead times and builds as the most important metrics to track over the next few months as Apple ramps sales of iPhone 12 models." 

RayJay Confident In New Products: RayJay is remains confident in the success of this year's launch based on production checks; the fact that the iPhones that are available remain supply-constrained; and a significant increase in carrier incentives. 

Caso maintained fiscal year 2021 estimates for the iPhone.

Citing strength in the rest of the businesses, the analyst raised his estimates for fiscal years 2021 and 2022.

Needham On Apple's Upside Value Drivers: Needham analyst Martin listed the following as Apple's important upside value drivers based on the fourth-quarter earnings report:

• All-time high installed base of active devices
• 585 million paid subscriptions, representing a quarter-over-quarter increase of 35 million
• Services revenues of $14.6 billion at a 67% gross margin, up 300 basis points year-over-year
• Supply chain constraints for most Apple products
• $19 billion in free cash flow

Apple Stepping Into New Growth Curve, Loup Says: The negative after-hours reaction to Apple's fourth-quarter results was due to investors misinterpreting the company reporting iPhone revenue below expectations and a perceived lack of visibility for the December quarter, Loup Venture's Gene Munster said in a blog post. 

The September quarter was better than it looked at the outset, and the implied December quarter guidance appears in line with consensus, said the sell-side analyst turned tech venture capitalist. 

Apple's business is stepping into a new growth curve driven by three factors, Munster said: a new normal following the pandemic where the company's products are foundational to working and learning; a three-year iPhone upgrade cycle powered by 5G; and an expansion in the appeal of wearables. 

AAPL Price Action: At last check, Apple shares were slipping 5.11% Friday to $109.43. 

Related Link: Apple Notches Record iPhone 12, iPhone 12 Pro Preorders In India

Photo courtesy of Apple.