Needham issues ‘strong buy’ on Apple

Analyst Laura Martin raises Apple price target 25% on the strength of Apple’s network effects.

From a note to clients that landed on my desktop Thursday:

  • We think iOS does NOT compete against Android (which both have a product view of the world at their core) and that a more accurate competitive framework is that AAPL’s ecosystem competes against Alphabet’s (GOOGL) ecosystem.
  • We believe that FAANGs will increasingly compete with each other and that winners and losers among them will be, in part, attributable to the moat created by their unique Network Effects (there are 13 types). In this report we describe the Network Effects at work for each of the FAANGs to predict winners and losers.
  • Investment Conclusions. Based on the strength of its Network Effects, its strong culture of monetizing its Network Effects, and its strong Balance Sheet, we conclude that AAPL is best positioned to outperform FAANG competitors in a battle between these ecosystem giants.

Upgrades to Strong Buy from Buy. Raises price target to $225 from $180. 

My take: Third price hike so far today, but this one—at 44 pages—offers the deepest dive yet.

2 Comments

  1. Jonny Tilney said:
    Hmmm. It is way overdue for analysts to come out and say it from the hilltops: Apple’s ecosystem is in a class of its own.

    Would like to see a brief list of the 13 network effects they see..

    1
    March 21, 2019
    • David Emery said:
      And some comparison with Thompson’s theories. From the blurb above, the concept of ‘network effects’ does seem to be aligned with Thompson’s thoughts.

      0
      March 21, 2019

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