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pacific-crest-is-concerned-about-iphone-8-expectations

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pacific-crest-is-concerned-about-iphone-8-expectations

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  1. Pacific Crest Is Concerned About iPhone 8 Expectations Where to buy iPhone8 online Apple iPhone 8 Price shares are down about 1% today to $154 in a lackluster market largely due to Pacific Crest’s Apple analyst, Andy Hargreaves, downgrading Apple to Sector Weight and recommending investors trim their positions. With all the reports of the upcoming iPhone 8 Hargreaves believes that investors are anticipating very healthy sales and not discounting for risks about gross margins, elasticity (demand for older versions if the new iPhone 8 is priced too high), supply issues and slower or declining growth post the iPhone 8. Upcoming super cycle I receive various sell-side analyst reports and have averaged their iPhone projections for fiscal 2017 and 2018. For this year 11 of them are projecting Apple will sell 216 million units which would be a 2% increase year over year and 8 of them are forecasting sales to increase 12% to just under 242 million in fiscal 2018. This is what is driving their fiscal 2017 EPS estimate of $8.95 to increase by 17% to $10.47 in fiscal 2018. However, Hargreaves believes many investors are anticipating fiscal 2018 iPhone unit growth in the mid to high-teens and with higher gross margins could generate EPS of

  2. $12.00. While this is possible if the new iPhone does not come through the stock will likely stall or not do much better than the overall market iPhone 8 for Sale. Valuation downgrade While Hargreaves doesn’t have an official price target he estimates fair value for the shares at $145 or 7x fiscal 2018 EV/EBITDA (Enterprise Value divided by Earnings Before Interest Taxes Depreciation and Amortization). iPhone 8 for Sale Enterprise Value is the company’s market capitalization (about $800 billion) minus its cash and investments ($257 billion) and adding back its debt ($99 billion) for a net value of $642 billion. While I believe it is worthwhile to use EV I’m not a big fan of EBITDA. While it is more of a cash flow number it assumes that interest and tax payments shouldn’t be taken into account. That being said if it is used consistently it can be helpful as another way to look at under and over valued situations especially since a number of investors use it. Hargreaves has an interesting chart (see below) that shows that when the iPhone 6 was launched that the highest EV/EBITDA ratio was 9.0x and that Apple’s shares are now currently trading a bit above this value. Since the iPhone 6 had such strong sales due to pent up demand for larger screen iPhones he believes (and I’d agree) that the iPhone 8 doesn’t have the same tailwind. What it does have going for it is a larger iPhone install base that could be looking to upgrade and that it captures a large majority of smartphone profits.

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