AAPL Stock: Samsung’s GN7 Issues May Be Structurally Beneficial to Apple

Street analysts see a number of indicators pointing to a better than expected iPhone 7 sales cycle.

Apple AAPL Iphone

Shares of Apple Inc. (NASDAQ:AAPL) edged up 2 percent this week to print the tape at $117.63 in recent trade Friday, as news of Samsung permanently suspending the sale and production of its Note 7 smartphone deepened overnight.

Samsung late Tuesday, issued a revised earnings forecast for Q316, saying it now sees its operating profit at $4.6 billion, down 33 percent from an earlier estimate. “What we have seen in previous share shifts..is that once people shift away, they don’t come back, because Apple has such high customer loyalty ratings, on the order of 90%,” Credit Suisse’s Kulbinder Garcha, who currently rates Apple stock ‘Outperform’, with a $150 price target, told CNBC, noting that Samsung’s problems may be structurally beneficial to Apple.

Garcha also said that he sees positive indicators pointing to a good momentum for the iPhone 7 cycle, estimating 48 million/75 million units in C3Q16/C4Q16.

Alongside Credit Suisse (NYSE:CS), Goldman Sachs’ (NYSE:GS) analyst Simona Jankowski also issued a research report, arguing that iPhone 7 demand is tracking ahead of expectations driven by the one week earlier than expected launch, better than expected carrier promotions, and Samsung Note 7 issues.

Jankowski raised her September and December quarter iPhone unit estimates by 1 million and  2 million [M] units to 45.6M and 78.1M, respectively.

It is to be noted though that if the revenues of Apple suppliers are any indicator, then the iPhone 7 may not be doing as well as Apple and its stockholders were hoping the gadget would. According to a ‘Nikkei Asian Review’ report rolled out Wednesday, major Taiwanese tech companies are seeing slumping Sept. sales amid weak iPhone 7 sales.

According to the publication, the “revenue of 19 Taiwanese tech companies on the Nikkei Asian Review’s watch list fell 1.52% from a year ago, compared with a year-on-year gain of 5% in August after a prolonged 9-month drop.” Analyst Jeff Pu with Yuanta Investment Consulting estimates Apple’s total iPhone 7 builds to be 74 million in the second half of 2016, compared to 84 million for iPhone 6s in second half of 2015.

Meanwhile, in her research Jankowski wrote that she expects Apple to report a solid fourth-quarter-2016 beat on October 25. Wall Street is looking for EPS of $1.66 and revenue of $5.26 billion. Last quarter, the tech giant posted a positive earnings surprise of 2.90%, reporting EPS of $1.42, $0.04 better than the Street’s consensus estimate of $1.38. Revenue however, fell 14.52% year-over-year to $42.4 billion versus the $49.6 billion reported.

The GS analyst rates Apple a ‘Buy’ with a $124 price target. Separately, Apple was also raised to $130 from $120 at Mizuho.

Apple Stock Action

Shares of Apple are on an impressive run. The equity has advanced 8.70% in the last 4 weeks and 19.42% in the past three months. Over the past six months the stock, which currently has 31 analysts rating it a ‘Buy’ versus only 2 rating it a ‘Sell’, has gained 7.08 percent. On a year-over-year basis, AAPL is up 7.21% compared with a 7.15% gain in the S&P 500.

The $637.3 billion market cap Cupertino, Calif.-based company currently has a median Street price target of $125 with a high target of $185.

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