UBS raises its Apple price target to $235

From a note to clients by analyst Timothy Arcuri that landed on my desktop Thursday:

Off low expectations, results/guide should be fine. iPhone mix remains challenging, but FX headwinds also start to abate in June. The big unknown remains China and 3rd party gov’t data did not show much iPhone improvement post-Chinese New Year, though the worse does seem to be behind us.

Our installed base analysis is still consistent w/AAPL commentary that first-hand phone replacement rates are still ~3yrs; ergo, iPhone units of ~180MM in C19 are very close to replacement barring a big extension this Fall if consumers really decide to wait for 5G and maybe foldable in 2020.

Ultimately, our view here remains unchanged; iPhone expectations for this Fall are already very low, investors may be under-estimating the degree/timing to which new services could contribute revenue and comps should get easier, and the stock remains the biggest global under-weight among active managers. We are raising our price target again… on a multiple that is now in-line with 10-year average relative to the market.

Maintains Buy rating and raises price target to $235 from $215.

My take: Not the first this week, and probably not the last.

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One Comment

  1. Robert Paul Leitao said:

    Essentially echoing the words of Morgan Stanley’s Katy Huberty, Mr. Arcuri states, “the stock remains the biggest under-weight among active managers.” In other words, there’s plenty of headroom for institutions to add to positions in Apple.

    It is likely investors (and analysts) are under-estimating the positive revenue impact of current services and recently announced services. Also, as the calendar moves forward, the Street will begin to price into the shares an anticipated massive iPhone replacement cycle in FQ1 2021 (CQ4 2020) from the shipment of the first 5G iPhone handsets. The availability of 5G modems for the iPhone line in the fall of 2020 is no longer in doubt.

    I expect further increases to Mr. Arcuri’s price target over the next 8 months.

    0
    April 26, 2019

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