Apple Stock: What Analysts Are Saying Ahead Of Earnings

Apple’s earnings day is fast approaching. Ahead of it, Wall Street has been weighing in on the company’s fundamentals and the stock. Not all opinions, however, have been bullish.
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Apple’s earnings day is Wednesday, January 27. The Apple Maven has been previewing the event for the past couple of weeks – and will cover it via live blog, as usual, after the closing bell.

Today, let’s take a look at what Wall Street analysts have been saying about the Cupertino company and its stock lately, ahead of the crucial earnings week.

Mostly bullish…

The last few research notes coming from Wall Street have been mostly upbeat about Apple’s prospects in the new year. RBC Capital’s Robert Muller was the most recent one to reiterate his buy on the stock and his price target of $145 per share.

Even better than that, a couple of experts have raised their targets on Apple ahead of earnings. This was the case of Loop Capital analyst Ananda Baruah, whose fair value estimate increased from $131 to $155 apiece, pointing at 20% upside opportunity on the back of “a really big year” for the iPhone and Mac.

Barclay’s Tim Long bumped his target price to $116 per share from $110, but kept his equal-weight recommendation. He did, however, offer a bit of color that sounded bullish.

According to the analyst, “fundamentals will matter in 2021 for the IT hardware sector, with a macro recovery broadly helping the group”. I interpret this to mean that the new year could be one of rising tides lifting all boats, but that higher-quality names like Apple stand to benefit more.

… but a word of caution

The bearish warning of the week was sounded by Goldman Sachs analyst Rod Hall. He holds one of the few sell ratings on Apple, with a price target of $85 suggesting about 35% downside risk.

Mr. Hall’s main concern lies with the iPhone. Rather than a “super cycle”, he believes that 2021 will bring about a typical redesign cycle. He sees the replacement rate in decline, and thinks that the negative trends will persist throughout the year.

To be fair, Goldman has been bearish Apple for the past nine months, during which the stock price increased by a whopping 80% or so. Therefore, Rod Hall certainly lacks an enviable track record covering Apple shares.

However, the analyst also raises a point that I believe to be very important. Here’s the quote from MarketWatch:

“While the COVID-19 crisis limited people’s ability to spend on things like travel and restaurants, potentially leaving them with more spending money for new electronics, Hall expects that a shift toward out-of-home spending as the economy starts to reopen could serve as a negative catalyst for Apple shares.”

Of course, I do not know for a fact that this will be the case, but the logic appears sound to me. If 2020 was the year to buy products and services to be used at home, the lack of a global pandemic in 2021 will likely mean that more money will be spent outside.

This may explain why Apple shares have been down 3% since the end of December 2020. Meanwhile, value and small cap stocks have been up 4% and 6%, respectively, over the same period of time.

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(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)