Analysts did note that continued declining revenues in China was cause for concern, but this was offset by strong and growing services revenue, increased capital returns, and expectations of an iPhone 8 super-cycle…
Of the eight analyst notes seen by Business Insider, seven rated the stock a buy and the eighth – Deutsche Bank – rated it a hold. Deutsche Bank analysts yesterday suggested that the iPhone 8 might be delayed until next year, though with very little in the way of evidence.
The seven remaining analysts had target stock prices ranging from Goldman Sachs’ $150 to Credit Suisse’s $170. The latter said there was much reason for optimism.
With the iPhone showing sustained growth, and Services again showing robust growth, we still look forward to an iPhone 8 super cycle. Long Term, given high retention rates, a superior ecosystem, and a multi-product compute advantage, we believe FCF of ~$75bn should be sustainable. We adjust CY17 revenue/EPS to $234bn/$9.32 (from $231bn/$9.51), and CY18 revenue/EPS to $257bn/$11.26 (from $252bn/$11.44).
FCF refers to free cash flow, defined as operating cash flow minus capital expenditures.
Bank of America Merrill Lynch additionally pointed to the strong capital return program and the flexibility generated by cash reserves of more than a quarter of a trillion dollars, while Macquarie emphasized services revenue.
The Services business continues to perform well and we expect more and more investors will build out detailed models and focus more on the key Services drivers. That will continue to be a positive for the stock.
You can read the full positions over at Business Insider.
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