According to Barron's, Citigroup (C +1.10%) analyst Jim Suva reiterated a "buy" rating on Apple (AAPL 0.04%) stock as well as a $145 price target. In this case, it wasn't the reiteration of the "buy" rating or the price target that caught my attention, but rather the claims that Suva is making with respect to iPhone 6/6 Plus demand.
In particular, Suva noted that the 64GB and 128GB iPhone 6 models were the "best-selling configurations," and said that "many locations are still selling out daily of the more popular 128GB memory configurations."
Better still, Suva said that even though Apple faces headwinds from a stronger U.S. dollar, he's still bullish on iPhone sales for the current fiscal year. He reportedly revised his unit estimate for the current fiscal year up to 225 million from 216 million, but revised down average selling price estimate to $658 from $675. That still works out to a roughly $2.25 billion increase in revenue.
Potentially good news for iPhone 6 relative to the new Android flagships
Although Apple has done a fantastic job with the iPhone 6/6 Plus, the company's competitors have released new flagship devices as well. We've seen devices such as the HTC One M9, the LG G Flex 2, and the Samsung (NASDAQOTH: SSNLF) Galaxy S6.
From the reviews I've read, the S6 appears to be the Android phone to beat. However, the S6 was first unveiled in early March, and it seems that iPhone 6/6 Plus demand -- at least based on Suva's report -- continues unabated despite consumer knowledge that the S6 will be available shortly.
This seems like an encouraging initial sign for Apple, but I do look forward to seeing how iPhone demand trends once the S6 is broadly available in stores.
What's the bottom line on the financials?
Barron's says that even though the analyst increased iPhone shipment estimates, the analyst's "Mac and iPad shipment forecasts go down."
When all is said and done, the analyst is now reportedly modeling Apple revenue of $227.2 billion for the current fiscal year and earnings per share of $8.81. These aren't much higher than analyst consensus numbers, which Barron's says sit at $225.8 billion and $8.62 per share, respectively.
In that case, is Apple still cheap?
If Suva is correct, then at the most recent close (as of writing), Apple trades at about 14.1 times trailing twelve month earnings. His price target of $145 implies multiple expansion to about 16.46 times the analyst's projected fiscal 2015 earnings.
This isn't deep-value territory by any stretch of the imagination (although the stock does look even cheaper once one backs out the significant cash Apple has on its balance sheet), but it's certainly far from expensive.
I'd call it a "GARP"
Analyst consensus seems to be calling for mid-single digit revenue growth for fiscal 2016 and fiscal 2017, following what is expected to be 23.7% revenue growth during fiscal 2015. Those aren't the kinds of growth rates that one would associate with a typical "growth stock." However, I'd argue that at this point Apple is a pretty good example of a "growth at a reasonable price" or "GARP" stock.
The company is still expected to deliver reasonable growth over the next few years and, more importantly, and it trades at a below-market multiple.
If you're looking to "get rich quick," Apple stock probably isn't the place to be. However, if Apple can keep on executing, and if it can deliver modest-but-consistent growth each year, then I think many investors would be happy to have it as a core tech holding in their portfolios for the long haul.
