Apple Still Eyes $1,111 Even as Earnings Miss: Analyst
A near 6 percent drop in Apple’s shares after quarterly results missed market estimates does not have analyst Brian White concerned – he’s sticking to his bullish $1,111 target for the shares because of the tech giant’s “exciting” product lineup.
“I think people want to aggressively buy Apple here because we have some of the most exciting product launches in the horizon in the company’s history,” White, Senior Analyst with Topeka Capital Markets, a broker-dealer, told CNBC Asia's "Squawk Box" on Tuesday. These new products in the pipeline — the iPhone 5, a potential Apple TV, a smaller version of the iPad and the iPhone coming to China Mobile – will drive earnings going forward, he said.
Apple shares fell to $600.92 on Nasdaq on Tuesday and after hours as the company said fiscal third-quarter revenue rose to $35 billion, lower than the average analyst estimate of $37.22 billion. It reported net income of $8.8 billion or $9.32 a share, lagging the $10.37 Wall Street had forecast.
Still, the stock's up 46 percent so far this year, and White says investors should not be too worried about short-term blips. In comparison, Apple's competitors such as mobile-phone maker Samsung Electronics is up about 7 percent this year, and PC maker Dell is down about 22 percent.
Apple will still be the winner over the longer term in what White calls a “ramp” in mobile Internet and he is not adjusting his target. In April, White raised his target for Apple shares to reach $1,111 within a 12-month timeframe from an initial target of $1,001. That would suggest an increase of more than 80 percent from current levels.
He was the first analyst to forecast that the stock would breach $1,000-mark, and his bullish estimate compares with a mean forecast of $724.29, according to Thomson/First Call, a provider of brokerage research.
White however isn't the only analyst who expects Apple share prices to rise above $1,000; Stuart O’Gorman of Henderson Global has a target of $1,200 on the stock.
“The valuation is so very cheap. It’s trading 9 times ex cash,” White said. “And, the market share of Apple is still very, very small, it’s 5 percent in PCs, 9 percent in mobile phones, so think about this mobile Internet ramp around the world, in places like China, places like India. We are still in the early stages.”
China Key Driver
China, which has been a huge driver of sales growth for Apple, will continue to be a bright spot, especially if China Mobile starts selling the iPhone, White said. China Mobile, the world's biggest telecom carrier by subscribers, said in May that it is in negotiations with Apple to carry the iPhone in China.
The firm is the only Chinese operator that does not officially carry the popular smartphone because its homegrown 3G technology is not supported by the chips used in current iPhone models. A deal between the two could happen before the end of the year, coinciding with the launch of iPhone 5 in fall, White said.
“They (China Mobile) have almost 700 million mobile subscribers of China’s 1.05 billion,” White said. “So it’s very, very important and it could be very material long-term. So it’s very exciting.”
Daryl Guppy, an independent technical analyst, is not as bullish on Apple and expects the stock to trade around current levels for some time.
“Yes, it’s possible that Apple will move to $1,111, but at this stage, that’s a longer term target rather than a short-term target,” Guppy told CNBC. “We may see a retest of the $620 level well before we get any directional break.”
For the current quarter, Apple expects earnings of $7.65 a share on revenue of $34 billion, well below the average estimate of $10.23 a share on revenue of $38.03 billion.
- By CNBC's Jean Chua.