Goldman Sachs’ Rod Hall eats hat, raises Apple price target to $240

From a note to clients that landed in my inbox Friday:

Apple is set to announce new products on September 12 in Cupertino, CA. In this report we provide a deep dive on various ASP options as well as a sensitivity analysis around various AppleCare+ pricing outcomes. We also illustrate why a $699 price point on the iPhone 9 makes little sense for Apple and would drive a FY19 EPS outcome that is below consensus. In our model we estimate the iPhone 9 prices at $849 and we see some flexibility down to $800 within the constraints of the current iPhone price curve.

Given the better-than-expected iPhone X demand this Summer we doubt Apple is inclined to go for lower price points and we would be tempted to delay availability of iPhone 9 if it were us to see how demand materializes for the much more expensive Xs+.

We also note that the Xs+ feature set is key as unexpected demand drivers beyond just a better camera would be potentially positive for the overall ASP outcome.

We also take this opportunity to eat our hat somewhat on our cautious stance this Summer and raise our 12-month price target to $240. We had expected worse iPhone X demand and some pullback in the stock – clearly neither of these two things happened. Given the limited upside from here to our new price target we stick with a Neutral rating but Apple is once again proving itself tough to bet against.

Maintains Neutral rating and raises price target to $240 from $200.

My take: Goldman Sachs, which dumped 19 million Apple stock in one three-month period last year, had some catching up to do. Since July 31 Hall has raised the bank’s Apple target a total of $76, from $164 to $240.

9 Comments

  1. David Drinkwater said:

    “Given the limited upside from here to our new price target we stick with a Neutral rating but Apple is once again proving itself tough to bet against.”

    Man, I wish someone had just *warned* us not to bet against Apple.

    3
    September 7, 2018
  2. David Emery said:

    Is this the first time an AAPL analyst admitted he screwed up?

    0
    September 7, 2018
    • Michael Thompson said:

      It would take much more than admitting that he screwed up recently. Rod Hall has been consistently and repeatedly bearish about Apple for years, both at JP Morgan Chase and now Goldman Sachs.

      From a long-term shareholder: Apology not accepted.

      The funny part to Apple Longs is that in the short-term Rod and his ilk harmed Apple, but in the long-term and because of Apple’s massive share buyback program, he enriched us.

      4
      September 7, 2018
  3. Fred Stein said:

    His first paragraph pretends to show fine-grained modeling of Apple’s pricing and future demand. But he just raised his target by 46% since 6 weeks ago. It’s just words. He doesn’t have a model.

    His $240 target is 8% above market. That is closer to ‘buy”, not neutral.

    4
    September 7, 2018
  4. Ken Cheng said:

    I like listening to Goldman’s economist, Hanzius, but their equity research, not so much.

    0
    September 7, 2018
  5. Gregg Thurman said:

    Phillip, [email protected] bounced back to me (got it off the Apple 3.0 website). Do you have a new email address? This is what I was sending you.

    Phillip, I couldn’t find a more appropriate email address so I’m forwarding this to you.

    In light of Apple’s anti-trust conviction, initiated by a complaint from Amazon, I thought this might be well worth an Apple 3.0 topic.

    https://www.nytimes.com/2018/09/07/technology/monopoly-antitrust-lina-khan-amazon.html?partner=rss&emc=rss

    2
    September 7, 2018

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