Apple Stock: A Look At Recent Sell-Side Opinions
On Friday, September 25, a couple of sell-side shops published their updated reports on Apple. It was interesting to see the contrast between Katy Huberty’s (Morgan Stanley) bullishness and Abhinav Davuluri, CFA’s (Morningstar) bearishness.
Let’s take a look at some of their most important arguments.
Ms. Huberty is an active analyst who publishes quite a bit on Apple. Her price target on the stock is $130 per share, suggesting 15% upside from current levels. This past Friday, she doubled down on her optimism, offering some of the same arguments that she has made in the past:
- The 5G upgrade cycle and the yet-to-be-announced iPhone 12 remains a bullish story. This becomes even more the case in the face of a stock price that has de-risked over the past month.
- Data suggests that Apple is taking market share away from its smartphone competitors in Europe and in the troubled Chinese market, which is “corroborated by strong iPhone 11 builds in the month of August”.
- Apple’s retail stores have been reopening at a rising pace. The open count has jumped to 446 out of 512 stores worldwide.
Mr. Davuluri is much less of a cheerleader. For starters, Morningstar ranks Apple one single star, and assigns to the stock a fair value of $71 per share – implying 37% downside potential (see table below). In addition, the analyst has offered the following comments:
- Apple’s economic moat is narrow, and the company’s brand equity could deteriorate if the technology lags that of competitors for too long. Morningstar cites Nokia as an example.
- Cost advantages could suffer if smartphone volume sales decline. Having to build iOS rather than use Android for free implies that Apple will always have a cost disadvantage.
- The analyst worries that customers might be holding on to their phones for longer, considering the high quality of premium devices nowadays. This could bode ill for iPhone sales going forward.
Read more from the Apple Maven:
(Disclaimers: 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)