Over the past week, bank analysts have published a number of insightful reports on Apple. Today, the Apple Maven reviews some of the most relevant ones, and recaps Wall Street’s overall sentiment towards the Cupertino company’s stock.
5G super cycle and record valuation
Wedbush analyst Dan Ives continues to be Apple’s “bull of bulls”.
He published a note on Monday, February 22, stating that the stock should reach $3 trillion market cap by the end of this year – representing an aggressive 43% increase from current levels in just about 10 months.
Mr. Ives continues to use his channel checks in Asia to support his optimism and Street-high price target of $175 per share, which is primarily justified by the iPhone 12’s ongoing 5G super cycle.
The analyst also made an interesting remark regarding streaming video. According to him, Apple missed the opportunity to acquire Netflix, several years ago, when it would have been more affordable to do so.
Now, he thinks Apple needs to acquire a studio to become a more relevant streaming video player:
“We’ve talked about an MGM, a Lionsgate, an A24, otherwise they’re going to continue to sort of be on the outside looking in. And that’s why I think this is something they’re going to be forced into, because it’s all about content.”
I have asked Twitter about Apple’s streaming video strategy. Here is what people have been saying:
Streaming video a weak spot
Dan Ives’ concerns over Apple’s position in streaming video was echoed by UBS’ Tim Arcuri, who holds a neutral rating on the stock. According to him:
“Apple TV+ adoption remains a middling offering with just 1 in 4 surveyed noting they have an Apple subscription compared to over 70% for Netflix, 40% for both Disney+ and Hulu and over 50% of Amazon Prime Video.”
I have noted before that, among Apple’s services, only a couple can be considered an undisputed success – iCloud and the App Store among them. The company is a clear underdog in online video and, to some extent, music.
However, Apple’s service segment continues to perform strongly. I have recently expressed some confidence that the division will see revenues double again in the next five years.
More on the EV opportunity
Lastly, Piper Sandler’s Harsh Kumar weighed in on Apple and the electric vehicle opportunity. The analyst, who holds a buy rating on the stock and price target of $160 apiece, thinks that entering the EV market makes sense for the Cupertino company:
“Similar to its other hardware offerings, Apple can enter the market at a time of peak technology disruption while avoiding the risk of forming the market.”
The analyst goes further and tags a dollar amount to the EV opportunity: $50 billion in revenues by 2030. The number may look quite large at first glance, but context is needed here.
In fiscal 2020, Apple produced nearly $275 billion in sales. At a speculated, compounded top-line growth rate of 5%, total company revenues should reach $450 billion in ten years. At that point, EVs would represent only roughly 10% of the total pie – about the size of the Mac segment today.
I have warned readers about the pitfalls of justifying an investment in Apple on the back of the EV opportunity. If anything, exuberance in December may have led to the stock jumping too high, too quickly.
At the end of the day, Apple is still a tech device and consumer services company. In my view, investors should be comfortable with this business model first, before speculating on anything related to the Apple Car.
Where the Street stands
Overall, bank analysts continue to be bullish on Apple.
The table below shows a “strong buy” consensus rating, out of 25 analysts tracked by Stock Rover. The average price target stands at nearly $150 per share, which represents almost 20% upside opportunity from current levels.
The recent pullback in Apple’s stock price might make an investment at current levels more appealing.
Explore more data and graphs
The table used in this report was provided by Stock Rover. I have been impressed with the breadth and depth of information on markets, stocks and ETFs that this platform provides. Stock Rover also helps to set up detailed filters, track custom portfolios and measure their performance relative to a number of benchmarks.
To learn more, check out stockrover.com and get started for as low as $7.99 a month. The premium plus plan that I have will give you access to all the information that went into my analysis and much more.
(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)