Apple Guidance 'Better Than Feared,' CLSA's Silver Says

• Shares of Apple Inc. (NASDAQ: AAPL) have appreciated 3.45 percent over the past five days, although they declined 19.69 percent over the last six months.
• CLSA’s Avi Silver has maintained a Buy rating on the company, with a price target of $130.
• Following the “better than feared” March quarter guidance, Silver believes that investors can now focus on the company’s longer term structural positives that are expected to drive up the share price over the next 12 months.

Analyst Avi Silver mentioned that “Apple delivered a surprisingly boring quarter and guidance. Results were basically in line while guidance was better than feared with a solid gross margin outlook.”

Despite this, however, management appeared more cautious regarding China and the global economic outlook. Although this stance seems justified, Silver believes that it “only adds fuel to the fire in an already fragile environment.”

The company’s China exposure, at 25 percent of sales, is higher than that of most of its peers. However, Silver expects Apple to be able to “weather the storm better than others,” given its strong balance sheet and solid positioning in the smartphone market.

According to the CLSA report, Apple’s longer term structural positives include “1) Apple’s deepening moat and more signs of a recurrent iPhone revenue stream 2) continued gross margin stability 3) cycle momentum as the iPhone7 component builds commence in May/June, and 4) a new streaming service potentially later this year.”

In the medium term, Silver believes that the biggest risk to the stock would be the uncertainty regarding the consumer demand outlook in China.