Apple Analysts See Strong 5G Outlook, Raise Price Targets

Analysts at Bank of America and RBC Capital Markets see evidence of 5G and iPhone 11 strength for Apple, among other areas of strength, prompting them to lift their price targets on the tech giant.

Apple analysts continue to grow more positive on the company, with two of them raising their price targets on the stock on Friday. 

Apple shares were falling 0.64% to $298.44 Friday, as the broader U.S. market experienced pressure after the U.S. killed a top Iranian general

Bank of America analyst Wamsi Mohan raised his price target on Apple to $330 from $290, wit the new target representing 10.7% upside from the stock's current level. "Current data points suggest continued revenue strength for Apple including continued double digit year-over-year app store revenue growth, and positive revenue trends suggested by inputs to our proprietary Apple indicator," Mohan wrote in a note. He said "iPhone demand remains strong," adding that his data shows that Apple increased its iPhone inventory levels in October and November by roughly 500,000 units. He noted many of his indicators are from sales trends at Apple suppliers in Taiwan. 

While Mohan sees strength for the first two quarters of 2020, he asserted that "longer-term Apple benefits from (1) 5G adoption, (2) strong wearables portfolio." He moved his multiple on 2021 earnings per share up to 19 from 17. "We use a higher multiple on multi-year iPhone visibility, combined with continued double-digit Services revenue growth." 

In the past six months or so, Apple's multiple has expanded to 21 times next year's earnings on strong revenue growth from the higher margin services business, while near-term revenue and earnings estimates have moved higher on ongoing bullishness on 5G and iPhone 11 demand. Now, analysts are growing considerably optimistic about Apple's hardware business for beyond 2020's expected iPhone upgrade cycle.    

RBC Capital Markets analyst Robert Muller raised his price target on the stock also to $330, from $295. "Our social media webscraping analysis, through RBC Elements, indicates higher customer interest and satisfaction with the current-year iPhone lineup, as well as sustained and increasing interest in Wearables (AirPods)," Muller wrote in a note. He added, "better customer reception and our outlook for the fiscal year 2021 (5G) lineup warrant a higher multiple." Muller raised his target multiple on 2021 EPS to 20 from 18 on "our continued belief in a multi-year upgrade cycle as we approach 5G." He also raised his near-term revenue and EPS estimates. 

Muller said social media data shows a spike i iPhone 11 mentions in September. As expected, iPhone mentions fell in October through December compared to September, but far less than in the past two years, when iPhone sales growth waned. Muller expects slight pressure on average selling price, although that's outweighed by his expected strong volumes.

He also said September social media mentions of AirPods spiked 64% year-over-year.

Analysts at large are now expecting a return to growth in iPhone sales this year.