Chat With Wedbush’s Dan Ives: The iPhone Is Underestimated

The Apple Maven has recently had a chat with Wedbush’s Dan Ives. Today, we dive deeper into the analyst’s hot take on the iPhone, and why some still underestimate the opportunity.
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Dan Ives from Wedbush Securities and Daniel Martins from the Apple Maven have recently sat down to talk all things Apple. The analyst had an interesting take on the iPhone, a key tenet of his bullish thesis on Apple stock  (AAPL) - Get Apple Inc. (AAPL) Report – price target $185 per share.

Below is a summary of some of Dan’s most important points regarding this important segment, which accounted for about half of Apple’s total revenues in fiscal 2020. For more on the iPhone debate, watch the short video above.

Figure 1: iPhone 12 purple version.

Figure 1: iPhone 12 purple version.

(Read more from the Apple Maven: All Things Apple Stock: A Chat With Wedbush’s Dan Ives)

iPhone: misunderstood and underestimated

Apple is one of the most heavily-covered companies in the world and the iPhone, one of the most popular consumer products to have ever existed. Clearly, we must all understand the device’s value proposition for the Cupertino company and its stock, right?

Well, not so fast. According to Dan Ives, Wall Street underestimates the opportunity. Regarding the current iPhone upgrade wave, his thesis starts with an installed base that has been ripe for a refresh:

“What the Street underestimates is how massive and elongated this super cycle is. If you look at it, we still have 25% of the base that has not upgraded their iPhones in the last three and a half years.”

Notice that, to this point, the argument has not even included two of the hottest topics of debate around the iPhone nowadays: the 5G opportunity and the stay-at-home habits of 2020-2021. Regarding the former, Dan Ives elaborates:

“I viewed it, in the beginning of it, as pure installed base. 5G does not get fully embraced for the next two or three years, until the networks are built out. In China [where the 5G infrastructure is further ahead], the iPhone 12, especially the larger Pro versions, really sold extremely well.”

On the stay-at-home subject, Dan may have his most contrarian view on the iPhone. While many on Wall Street seem concerned about Apple not being able to follow through on strong pandemic year results, the Wedbush analyst sees the opposite:

“Don’t lump Apple in with a pull-forward, work-from-home story. Without the retail piece, I think [the pandemic] actually net-hurt them. This is actually why, when you look at iPhone 13 coming out of the gates in Asia, it’s actually up vs. the iPhone 12 pre-COVID.”

Dan may have a valid point here. Yes, the iPhone dazzled in the most recent quarter. But the chart below shows how the strong holiday and post-holiday period followed a long stretch of dismal iPhone sales since, at least, the start of fiscal 2019. This trend is consistent with Dan’s theory of pent-up demand leading to an elongated super cycle next.

More to come

For more insights from Dan Ives, from the turnaround in Greater China to a discussion on how to best value Apple stock, follow the Apple Maven on and on Twitter. We will dissect each key topic of conversation in the next few days.

Twitter speaks

We recently asked Twitter if Dan Ives’ Street-high $185 price target on Apple stock might be reasonable, too optimistic, or not optimistic enough. Here are the responses:

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)