Apple Inc. Gets Four-Legged “Buy” From Needham

Apple Inc. is one of the most exciting stocks on Wall Street as the firm heads toward the release of its tenth anniversary iPhone. Despite the big product launch just ahead, however, Apple stock isn’t looking all that hot. Shares are still trading below highs hit in the early part of June, though the price does seem to be recovering.

Analysts from Needham have taken on the challenge of justifying why they think Apple is a Buy. Laura Martin, who authored the report for the research house, says there are for big reasons why Tim Cook’s firm is the pick of the year. Here’s a look at the four legs of that value structure, according to Martin.

Apple Inc has four advantages

1 Strategic positioning is strong

If the global smartphone market is set to grow, who is going to gain? If it shrinks, who is set to defend their position more resolutely? Apple Inc. is in a very strong strategic place right now, and it is in a market-leading redoubt from which it can take advantage of market situations.

2 Massive revenue upside

As far as anyone can tell, the smart phone market is going to grow in total dollar size in the years ahead. That leaves Cupertino with a massive revenue upside that could lead it to beating its earnings targets time and time again.

3 Risks are falling

After sales fell in 2016, there were big worries that Apple would be sidelined in an emerging market smart phone race. That marginalization just isn’t really visible in 2017, and Wall Street is expecting big things as the firm heads toward its next fiscal year.

4 New iPhone brings new catalysts

This is just about the most talked about story on Wall Street. While the next gen iPhone, which has been dubbed by the tech world the iPhone 8, iPhone X, and tenth anniversary iPhone, is expected to bring revenue boosts, Martin thinks there’s more to it than that. In her view, there will be all sorts of growth catalysts from the next iPhone launch.

Here’s the real Apple stock thesis

Martin doesn’t spend time in her report worried about services or iPads. Because she views Apple as a smart phone seller, her thesis is rather simple.

She thinks that smartphone revenues are going to grow, and, therefore, so will Apple Inc. . Meanwhile her targets for EPS are $8.94 and $10.24 for FY2017 and FY2018 respectively.

Apple users lover their devices. This user-end stickiness, so, is key to the firm’s future growth. Despite the reliance on future growth, this report doesn’t put much focus on the iPhone 8. She didn’t talk about the release date either. It’s more of a stoic look at the reality of Tim Cook’s market position.

Therefore, according to Martin, Apple stock is worth $165. Earlier on Thursday shares were selling at $153, not far below the Needham target. That may not be as exotic as some other forecasts, but it is grounded. That’s something that those with stock in the iPhone maker should be willing to embrace in a Wall Street assessment.

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Adrian Smith

Adrian Smith is a finance and tech writer and currently working on a Masters in Business Information. He has developed a keen interest in all things finance and technology and loves to write about it.


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