He has a price target of $131. Apple recently traded at $117, up 0.4%, about in line with the Nasdaq Composite’s 0.21% gain. The Cupertino, Calif., company's shares have as risen 59% year to date.
“AAPL’s shares have historically outperformed in scenarios of consistent upside to [Wall Street] forecasts or as negative trends, principally iPhone shipments, stop worsening,” Baruah wrote in a commentary.
“Currently, we see a scenario of upside to consensus in near-term iPhone build and shipment forecasts (iPhone 13 build forecasts also look positive relative to consensus) as well as upside to Mac, iPad, and likely AirPod, Watch, and Services sales well into calendar year 2021.”
Given “a broad tailwind of product and services growth, we see AAPL’s shares sustaining a valuation premium to the S&P 500,” Baruah said.
“We now forecast calendar year earnings per share of $4.23 (consensus $3.87) vs. $3.89 previously. Our valuation represents a premium of 1.4 times the S&P 500 vs. a peak of 1.6 times in the last 12 months.”
Baruah notes that in 2019 Apple “began to trade in line [with] to ahead of the S&P 500 on expanding sales growth tailwinds.
"If our thesis proves correct and product outgrowth sustains well into 2021, driving accelerated growth in high-margin services sales, the expanded premium is warranted.”
Apple’s trailing price-to-earnings multiple stands at 36, according to Morningstar, almost matching the S&P 500’s p/e multiple of 37, according to multpl.com.