Evercore initiates Apple coverage at $205

Amit Daryanani, late of RBC, is now covering Apple for Evercore.

From a note to clients that landed on my desktop last week:

ALL YOU NEED TO KNOW: We are initiating on AAPL w/ an Outperform rating as we see several catalysts that should enable the stock to grind higher from current levels. While we understand iPhone units (and sales) will remain muted through FY20 (5G launch) the narrative has and continues to shift towards services and a higher mix of recurring revenue for AAPL. Key levers for upside include: a) services growing double-digits with potential acceleration given new revenue streams, b) gross margins inflecting higher for the remainder of the year given easing commodity costs and better leverage, c) cap allocation enables 2-4% share reduction, and d) non iPhone hardware sales inflect higher and have better margins.

Net/net: AAPL stock should continue to outperform the market driven by strong FCF [free cash flow] generation, ability for outsized capital allocation, and a growing iOS install base that generates sustained and recurring FCF growth.

We do think AAPL shareholders have to contend with the volatility induced by ongoing China/US trade wars and its impact to AAPL and its revenues/EPS.

Initiates coverage with Outperform rating and $205 price target.

My take: When last we heard from Daryanani he was beating a slow retreat, lowering RBC’s Apple price target from $250 to $240 to $235 in the space of two months.

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