Apple Approved to Sell iPhone 6 in China: What Wall Street's Saying

NEW YORK (TheStreet) - Apple (AAPL) "fever" is starting all over again - this time in China, says Cantor Fitzgerald analyst Brian White.

Apple said Tuesday that it will begin selling the iPhone 6 and iPhone 6 Plus in China beginning Oct. 17. Apple announced it sold more than 10 million units in its opening weekend, despite the lack of availability in China. This news will allow Apple to sell the iPhone to the three major state carriers in China, including China Mobile (CHL) , China Telecom (CHA) and China Unicom (CHU) , as well as Apple's mainland China retail stores and Apple's Chinese Web site.

Apple customers will be able to pre-order the devices from its online store starting Friday, Oct. 10.

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Apple shares are down 1.7% for the month of September. The stock rose 0.60% to $100.71 on Tuesday. Here's what analysts were saying about Apple on Tuesday.

Brian J. White, Cantor Fitzgerald (Buy; $123 PT)

Last night, Apple announced that the iPhone 6 and iPhone 6 Plus will be available for purchase in China on October 17 and pre-orders will begin on October 10. During our China/Taiwan Tech Tour last week, we forecasted an October launch for the two new iPhones, and we believe the appetite for the new devices will be insatiable. We reiterate our BUY rating on Apple and believe the stock offers attractive upside during what we believe is the next "super cycle" for the company.

Apple Fever Starts All Over Again in China. Our meetings with the leading China-based, wireless carriers last week and discussions with numerous contacts in Asia have provided us with confidence in the notion that the iPhone 6 Plus and iPhone 6 will be met with an insatiable appetite in China.

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Sundeep Bajikar, Jefferies (Rated New Hold; $110 PT)

Our proprietary ecosystem framework suggests 1) Apple is over-earning on iOS driven by 2x-higher device ASPs compared to Android, 2) Apple is monetizing software/services on its iOS device installed base at a rate equal to or better than Google's monetization of Android, and 3) Google is monetizing a larger device ecosystem. We think Apple would benefit more from scaling up its device installed base, than from monetizing existing customers at a higher level.

Our FY15 EPS est of $7.69 is 8% higher than the Street's, in part because we believe the Street model does not yet fully capture Watch, Pay, and Beats. Over the last 6 months, AAPL's P/E (NTM) expanded by 20% from its 3yr avg. of ~12x to 14.5x. We think the stock is pricing in EPS of $8+, including share gains from Samsung, and think there is downside risk near term. We prefer Samsung over AAPL longer term, given Samsung's strong technology position and depressed valuation. We could become more constructive on AAPL with lower valuation or evidence of a business model shift toward software/services.

Andy Hargreaves, Pacific Crest Securities (Sector Perform; N/A PT)

Strong iPhone demand should allow Apple to report FQ4 (Sept.) results roughly in line with sell-side estimates and guide to FQ1 (Dec.) revenue and implied EPS above sell-side estimates. We see the potential for slight upside to our FQ4 iPhone unit sales estimate of 36.1 million, but believe supply constraints and FX headwinds will limit the magnitude. Improving iPhone supply should allow Apple to guide FQ1 revenue and EPS above the current Street estimates of $62.8 billion and $2.35, respectively. However, we believe buy-side estimates for FQ1 are well above sell-side estimates, so Apple's guidance will likely have to handily exceed the sell-side estimates to drive the stock higher.

We expect fewer new iPhone users in F2016 will prevent material growth in Apple's total profitability. Although we remain positive about the prospects for the iPhone 6 cycle, we believe AAPL is likely to experience multiple contraction through the cycle as investors look forward to substantial deceleration in revenue and EPS. We estimate 12-month fair value at $100 based on 6.5x EV/EBITDA, adjusted for estimated cash production and buybacks over that period as well as potential taxes on international cash.

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TheStreet Ratings team rates APPLE INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate APPLE INC (AAPL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and solid stock price performance. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.3%. Since the same quarter one year prior, revenues slightly increased by 6.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although AAPL's debt-to-equity ratio of 0.26 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.18, which illustrates the ability to avoid short-term cash problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Computers & Peripherals industry and the overall market, APPLE INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • 44.56% is the gross profit margin for APPLE INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 20.69% is above that of the industry average.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 42.27% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, AAPL should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.

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--Written by Laurie Kulikowski in New York.

Follow @LKulikowski

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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