Mac, iPhone sales boom prompts raised Apple estimates
Canaccord Genuity analyst T. Michael Walkley has raised his AAPL estimates on strength of a boom in iPhone and Mac sales as the company prepares to announce third quarter earnings on July 27 after market close, but at least one analyst has
Turn it up to $175
The analyst has raised his target on the stock to $175 from $165, noting multiple reasons for optimism, not least the 5G upgrade cycle, warning consensus estimates will prove “conservative”. This makes sense given the strength of the ongoing ‘supercycle’.
“Apple is well-positioned to continue to benefit from the 5G upgrade cycle, and we anticipate strong overall growth trends as 5G smartphones ramp and its installed base expands with higher-margins services revenue,” he wrote. “Longer term, we expect the higher-margin services revenue growth to outpace total company growth and drive gross margin expansion.”
“With the 5G upgrade cycle likely a benefit through at least C2022, other hardware categories growing double-digits, and continued mix shift toward high-margin services, we believe the share price remains compelling for longer-term investors. As a result, we reiterate our BUY rating, raise our estimates, and increase our price target to $175.”
The analyst also has aggressive estimates for Mac and iPhone sales, predicting:
- iPhone sales will exceed estimates.
- Predicts 47 million iPhone sales for up to 267 million sales this year.
- Services to maintain “high-teens” revenue growth.
“Apple is outperforming its competitors across all hardware categories, and the strong ecosystem is leading to a very loyal customer base buying more hardware products and using more services,” the analyst said.
Wedbush analyst Daniel Ives recently echoed these sentiments. Warning consensus estimates were conservative he noted growing demand in China and thinks iPhone 13 demand will be similar/slightly stronger than iPhone 12. Ives has an Outperform rating and a price target of $185 on the shares.
UBS analyst David Vogt recently raised his target on Apple to $166 from $155. He noted what seem to be strong iPhone sales in what is typically a seasonally slower quarter and better Mac sales despite supply chain headwinds.
Meanwhile in the background, Apple’s iOS customers seem to be becoming increasingly loyal, which in itself further galvanizes its platform loyalty and the potential to see supporting products and services.
“In the most recent quarter, Apple had an edge in loyalty, with 93% of prior iPhone owners upgrading to a new iPhone, compared to 88% of Android owners staying with Android,” said CIRP. “Over several years, iOS gained about five percentage points in loyalty, while Android remained flat. This allowed Apple to steadily increase the iOS share of new smartphone activations.”
Apple also continues to expand its distribution and availability. Most recently it has allegedly reached a deal to offer iPhones via LG stores in South Korea, a move which puts it directly against its old rival Samsung in smartphone sales in that country.
What are you expecting from iPhone 13?