Adding fuel to Apple stock’s (AAPL) - Get Apple Inc. (AAPL) Report recent rally, Wall Street analysts have been publishing bullish reports on the Cupertino company ahead of earnings. One common theme that has surfaced lately is optimism about the upcoming iPhone 13 cycle.
Today, the Apple Maven looks at what experts have been saying about Apple’s smartphone sales, and whether the segment can help to lift AAPL past $150 per share.
(Read more from the Apple Maven: How Wall Street Enthusiasm Fueled The Rally In Apple Stock)
The latest from Morgan Stanley
Kathy Huberty of Morgan Stanley has been the most recent analyst to support Apple stock by lifting her price target to $166 from $162. The research shop’s new estimate suggests 12% upside opportunity from current levels.
In her note, Katy cited “stronger demand forecasts and improving supply-chain dynamics heading into Apple's iPhone 13 launch in the fall”. Driving optimism are several factors: 5G adoption, device replacement cycle, new features (namely camera and battery), competitive momentum against Huawei, and the reopening of physical stores.
Morgan Stanley caveats, however, that strength in iPhone sales may not translate into higher share price. This is in line with my concerns that, the higher AAPL climbs, the less likely it is to produce superior returns in the following 12 months.
(Read more from the Apple Maven: Apple Stock Surges, What Next?)
Other bullish comments
Katy’s remarks are consistent with other research notes that have been recently published. Wedbush’s Dan Ives reinforced his optimism, after estimating earlier in 2021 that initial builds for the device would hover around 100 million units – above Bloomberg’s reported 90 million projection.
Meanwhile, JPMorgan has spoken of iPhone 13 sales being underestimated by investors today. The upcoming smartphone cycle was one of the reasons why the analyst bumped AAPL share price slightly to $175 and added the stock to the bank’s growth idea list.
Apple Maven’s thoughts
A key concern that I, and probably many Apple investors, have in 2021 are tough comps. Coming out of a pandemic year that caused demand for consumer products and services to surge, it will be hard for Apple to top record-breaking growth rates in Mac, iPad, and others over the next few quarters.
But the iPhone, which represented half of the company’s total revenues in fiscal 2020, could be an exception. The graph below shows that the holiday quarter of 2020 and the most recent period were outstanding for iPhone sales, in part due to the delayed launch of the iPhone 12 that created a backlog.
But the device underperformed for at least two years prior to the recent spike in demand. This is one sign that the iPhone upgrade cycle could still have legs. And since this segment is a key pillar of virtually any investment thesis on AAPL, the stock could get a boost from it in the second half of 2021.
iPhone sales were unimpressive through fiscal 2019 and 2020 – but demand for the device has skyrocketed since the most recent holiday quarter. What do you expect of the iPhone in the second half of 2021?
Is the price right?
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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)