Apple Inc. (NASDAQ:AAPL) has had both its earnings estimates and price target increased by Canaccord Genuity (TSX:CF, LSE:CF) ahead of the tech giant's third-quarter earnings report due on Tuesday, July 27, based on strong demand across the company’s products.
In a note to clients, the Canadian broker's analysts said they were increasing their third-quarter 2021 iPhone sales estimate to 47 million from 45 million units and updating their 2021/2022 iPhone unit estimates to 250/267 million from 244/273 million.
They said they have also updated the mix a bit more away from the iPhone 12 mini, resulting in their total third-quarter iPhone revenue estimate increasing to $35.8 billion from $32.7 billion and 2021/2022 iPhone revenue estimates to $197.9/$208.8 billion from $183.0/$196.1 billion.
Based on the increased iPhone estimates and expectations for strong growth trends continuing across all product lines, the analysts increased their third-quarter 2021 EPS estimate for Apple to $1.03 from $0.94 and their 2021/2022 EPS estimates to $5.45/$5.85 from $5.12/$5.49.
The analysts pointed out: "Apple continues to demonstrate the strength of its product ecosystem, and we believe consensus estimates will prove conservative for Q3 results and Q4 guidance should Apple return to providing guidance.
"Apple is well-positioned to continue to benefit from the 5G upgrade cycle, and we anticipate strong overall growth trends as 5G smartphones ramp and its installed base expands with higher-margins services revenue. Apple’s ecosystem approach, including an installed base that exceeds 1.65B devices globally and now over 1B iPhone users, should continue to generate strong services revenue."
They added: "Longer term, we expect the higher-margin services revenue growth to outpace total company growth and drive gross margin expansion. With $83B in net cash, Apple has a strong balance sheet to continue to invest and support long-term growth.
"With the 5G upgrade cycle likely a benefit through at least C2022, other hardware categories growing double-digits, and continued mix shift toward high-margin services, we believe the share price remains compelling for longer-term investors."
As a result, the Canaccord analysts reiterated their Buy rating on Apple and increased their price target to $175 from $165 using the same 30 times multiple s their 2022 EPS estimate.
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