Apple Shares Upgraded to Overweight at Wells Fargo on Valuation

Apple shares were upgraded to overweight at Wells Fargo on valuation. The firm estimates that over the next 12 to 24 months Apple will be able to drive earnings back to $15 a share.
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Apple  (AAPL) - Get Report on Friday was upgraded to overweight from neutral by Wells Fargo analysts, who see the tech company as a good valuation proposition even amid the uncertainty about the effects of the coronavirus. 

The firm affirmed its $315 price target on the Cupertino, Calif., company while stating that over the next 12 to 24 months, Apple will drive earnings per share back to the $15 range while sustaining $40 billion or more in free cash flow.

Analyst Aaron Rakers sees supply-chain improvement from important partners like Foxconn, which last week reported that it was resuming ramping its labor capacity more quickly than expected.

Apple's strong cash position and consistent free cash flow provide significant flexibility to return capital, adding to its value to investors amid uncertain times in the market, the analyst said. 

Other catalysts include a positive 5G smartphone upgrade cycle and Apple's expanding wearables-home-and-accessories category. 

The firm did lower its second-quarter iPhone-shipment estimate to 36.5 million from 39.1 million. The earlier estimate was already lower than Wall Street's consensus 42.6 million estimate. 

But those estimates could be offset by the growth of Apple's services segment. 

"Apple exited the fiscal 2020 first quarter with 480 million total paid subscriptions, an increase of some 120 million year over year and reflective of what has been a consistent more than 30 million quarter-over-quarter trend," Rakers said. 

"Apple has previously noted that it expects to surpass its prior exiting 2020 target at more than 500 million total paid subscribers during the fiscal 2020 second quarter (March 2020); now targeting 600 million-plus paid subscribers exiting 2020."  

 Apple shares at last check were up 7.5%.

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