Analysts from three firms are approaching the Apple story from three angles today: the results of the company’s suppliers, its enterprise efforts and free cash flow
Apple shares soared as high as $121 per share today, setting a new record high for the stock. The news comes after analysts at Canaccord Genuity upped their price target for Apple from $135 to $145 per share.
Other firms, including Cantor Fitzgerald and Barclays, also issued positive reports on the company this week.
Apple Barometer suggests strong performance
In a report dated Feb. 9, Cantor Fitzgerald analysts Brian White and Isabel Zhu provided updated results from their Apple Barometer, which analyzes the sales results of the company’s suppliers. They said the results for January are in line with historical seasonality. Apple, however, has guided for the March quarter’s results to fall steeper than usual.
The Cantor Fitzgerald team reported that sales in their Apple Barometer declined 11% month over month, which is in line with the average decline over the last nine years. It’s meaningfully better than the four-year average of a 16% decline, however.
For the March quarter, they estimate a 25% sequential decline in revenue, which is far worse than the five-year average decline of 16%. It’s even worse than last year’s 21% decline. It’s better than Apple’s guidance though, which at the midpoint of between $52 billion and $55 billion suggests a 28% quarter over quarter decline.
Apple suppliers report strong performance
White and Zhu also reported that Apple’s other suppliers had positive trends in January. Pegatron, which isn’t part of their Apple Barometer, saw an increase of more than 3% in sales month over month. That’s similar to last year’s increase in January.
Three other iPhone 6 and iPhone 6 Plus suppliers also saw a 2% aggregate increase in January, beating last year’s 12% decline. When Hon Hai releases its latest results tomorrow, further data points on how Apple might be doing in the current quarter should be available.
White and Zhu currently have a Buy rating and $160 per share price target on Apple.
Barclays focuses on Apple’s cash flow
While Cantor Fitzgerald focused on Apple’s suppliers, Barclays analysts Ben Reitzes and Ryan Jones call attention to the company’s cash flow in their report dated Feb. 9. In the December quarter, Apple reported $30.5 billion in free cash flow, which amounted to $5.19 per share. They estimate that this was about 35% higher than consensus estimates for Apple’s free cash flow in the quarter.
The Barclays team estimates $63 billion in free cash flow, which amounts to almost $11 per share, for this year and $66 billion or almost $12 per share next year. However, they think even these numbers could end up being conservative. But when looking at these numbers they say Apple stock looks “cheaper” on an EV / FCF basis “than almost any other meaningful bellwether” they could find—not just in the tech industry.
They believe Apple will announce a new three-year capital return program of $150 billion to $200 billion in April and that management may even raise the forecast later, which is pretty typical. The Barclays team has an Overweight rating and $150 per share price target on Apple.
Apple moves up in enterprise
A third angle was taken by UBS analysts Steven Milunovich and Peter Christiansen in their report also dated Feb. 9. They looked at Apple’s partnership with IBM, which they think will really give the company a boost in enterprise sales.
The UBS team said it appears as if Apple is in control of customer engagement in this partnership. Their checks also suggest that IBM’s salespeople are only allowed to have Macs when they do keynote presentations developed by Apple.
“This partnership probably has more teeth than most given the one time competitors are highly complementary today and have opposite strengths,” the analysts wrote. “Will the speculated 13″ iPad Pro play into the enterprise push?” they pondered.
Apple CEO Tim Cook has said that more than 12 enterprise customers have signed on as “foundation customers” and that IBM is talking to 130 more potential customers about MobileFirst for iOS. He added that the first ten apps they have developed for enterprise customers were for specific verticals like banking, retail and airlines. There are more than 100 additional industry apps coming, and Milunovich and Christiansen said they’ve heard that IBM is going to be developing “horizontal apps” as well, like “supply chain capabilities.”
UBS has a Buy rating and $130 per share price target on Apple.
