High praise across the board. A bunch of new price targets, including a Street-high $300.
Excerpts from the notes I’ve seen, new entries on top.
Wamsi Mohan, Merrill Lynch: Results and guide good enough to carry the year. We expect shares of Apple to trade higher into year-end given that (1) estimate revisions are likely to be more positive, (2) demand trends appear to be solid for iPhones, (3) wearables are not in supply demand balance and can drive continued upside into 1H20, (4) potential launch of iPhone SE2, Augmented Reality products and 5G iPhones in 2020 drive positive headlines, (5) gross margins headed higher in 1H20 given higher services mix, (6) channel inventory levels not abnormal even at high end of rev guidance range, (7) high confidence in estimates into year-end creates performance driven upside for underweight growth managers, (8) compares get much easier in China and Emerging Markets, and (9) Installed Base continues to grow amid Android switchers. Reiterate Buy on positive estimate revisions, strong capital return and upcoming product cycles. Buy. Raises price target to $270 from $260.
Katy Huberty, Morgan Stanley: Clean Across the Board. With clear catalyst path, AAPL remains top pick for 2020. Apple is converting its significant R&D investment ($16.2B in FY19) to introduce innovation across a broader portfolio of products and services. At the same time, the company is holding margins while making its products more affordable through pricing, trade-in, financing and bundle offers. These factors support our view that revenue growth will continue to improve through FY20, even ahead of the 5G iPhone launch and TV+ paid user ramp in FY21. The company continues to return cash to shareholders at a rate of $20B per quarter, yielding 8% between buybacks and dividends. Overweight. Raises price target to $296 from $289.
Rod Hall, Goldman Sachs: Beat and raise driven by iPhone and Wearables, with some help from Services. We went into this report believing Apple would probably benefit from increased inventory build in the December quarter, but we exit believing guidance does not anticipate any abnormal channel inventory build. Meanwhile, Services came in ahead of our forecast, with likely drivers being the launch of Apple Card and Apple Arcade. We had anticipated slightly weaker Chinese demand in our iPhone forecast, but overall numbers seem to be slightly better than our forecast and closer to consensus. On TV+, Apple didn’t provide much more color on their underlying assumptions for the trial, but we see guidance as confirmation that the company anticipates a lower take rate than we had originally forecast. We modify our model to reflect this. Neutral. Raises price target to $188 from $165.
Andrew Uerkwitz, Oppenheimer: Clean, Quiet Quarter. We continue to believe Apple will grow top line faster than GDP over the short/medium term with revenue swinging on the product launch cadence. Near term, 5G may temporary shrink the replacement cycle; Apple Arcade is the must-watch segment for medium-term growth while healthcare initiatives are the likely “one more thing” for growth in the long term. Perform. No price target.
Matthew Cabral, Credit Suisse: A Solid Start to the iPhone 11 Cycle. Against a bar that seemingly kept getting higher into the print, Apple delivered as the iPhone 11 cycle is off to a better-than-expected start and commentary about further improvement in y/y trends expected during C4Q was encouraging. Further, broad-based Services momentum checked the box for the longer-term bull thesis, with several key categories once again reaching all-time highs (App Store and AppleCare, among others). We remain on the sidelines, as valuation looks stretched at ~18x CY20 EPS; to get more positive at these levels, we need clear line-of-sight to sizeable Services-led upside ahead. Neutral. $221.
Daniel Ives, Wedbush: With Back Against the Wall Cook & Co. Come Out Swinging. With all the perceived headwinds going against Cupertino in the last three months (smartphone maturity, competition rising, China tariff storm clouds, Huawei backlash in China), the company with its back against the wall delivered a home run quarter with stronger China demand on the heels of iPhone 11 success the star of the show. Outperform. Raises price target to (street high) $300 from $265.
Michael Olson, Piper Jaffray: Sept Qtr Upside Driven by iPhone, Wearables & Services. Apple reported Sept. quarter revenue and EPS ahead of the Street (2% and 7%, respectively). iPhone revenue was above the Street (+2% vs. consensus), Services revenue grew 18% y/y and was 2% above the Street, while gross margin was essentially in-line at 38%. Revenue guidance for the Dec. quarter is 1% ahead of consensus at the mid-point, with the gross margin guidance slightly above the Street. Looking into FY20, Apple is in the midst of a perfect storm, with current iPhone performing at-or-above plan, non-iPhone (especially wearables and services) trending better than expected and growing anticipation for 5G iPhones that will be coming late in the fiscal year. Overweight. Raises price target to $270 from $243.
Samik Chatterjee, J.P. Morgan: Manages to Clear High Hurdle of Expectations for F4Q Results and F1Q Outlook. Investors might be wary of sales momentum carrying into December quarter, although we believe the company has higher visibility this year. Given the sales challenges faced by Apple in the Dec-18 quarter, which led Apple to revise guidance below the low-end of its initial guide, we understand that some investors might be wary of the revenue guide for F1Q20. However, our discussions with the company indicate greater confidence in the revenue forecast for F1Q20 relative to F1Q19, led by the earlier timing of the launch of the highest volume iPhone (iPhone 11 vs. XR) giving the company’s better understanding of volume momentum and velocity heading into the December quarter. Additionally, the higher portion of services revenue in the mix with revenues of a subscription nature drives higher visibility into the guide. Overweight. Raises price target to $280 from $275.
Aaron Rakers, Wells Fargo: Wearables And Services Power Apple Higher, China Stabilizing. We expects investors to most notably focus on: 1) Accelerated Services Growth… 2) Wearables Upside / Momentum into 2020 Holiday Season… 3) iPhone 11 Cycle Stronger-than-Expected… 4) China. Market Perform. Raises price target to $245 from $215.
Gene Munster, Loup Ventures: iPhone Road to Recovery Continues Boosted by Wearables and Services. These results continue to be impressive for the second straight quarter, given the company’s China, macroeconomic, and competitive headwinds. Similar to last quarter, we were given more evidence that Apple’s ecosystem has a steadying effect on the overall business. We continue to believe that recent results and the roadmap for the next two years will prove to be a turning point for investors to begin valuing Apple with a more appropriate multiple. While shares are up 16% in the last three months, we don’t feel that the true value of Apple’s ecosystem is being accounted for by investors.
Amit Daryanani, Evercore ISI: Cook 2020? With Execution Like This Why Not. While AAPL has had a good run (+54% YTD) we see sustained room for upside given the Dec-qtr guide looks extremely conservative… and CY20 could mark the start of a 5G driven cycle that could bolster the stock higher. Outperform. Raises price target to $262 from $253.
Daniel Ives, Wedbush: Cook and Cupertino Deliver Home Run. There were no blemishes in the quarter with Cook & Co. delivering a masterpiece quarter despite its back against the wall with the company the poster child of the US/China trade battle. Overall we would characterize this quarter/guidance as a major feather in the cap for the bulls that should drive the stock to higher over the coming months. Outperform. $265.
Amit Daryanani, Evercore ISI: FLASH Impressive Print/Guide. AAPL reported Sept-qtr results that were above expectations with a print of $64.0B/$3.03 (Street at $63B/$2.83). The company’s Dec-qtr guide is modestly also ahead the street, with AAPL guiding sales of $85.5-87.5 and EPS at ~$4.53 (Street at $86.7B/$4.44 for Dec-qtr) and implies sales are flat sequentially. Dec-qtr guidance calls for: 1) Gross-margins of 37.5-38.5%, flat q/q vs. Sept-qtr at 38.0%. Sept-qtr gross margins came in above street expectations of 37.9% while Dec-qtr GM guide is also above consensus expectations of 37.6%. 2) iPhone revenue of $33.36B grew 29% was above consensus estimate of $32.8B 3) China was up 17% y/y , 4) Services revenue of $12.5B was up 20% y/y and came in above consensus of $12.2B. Outperform. $253.
- Tim Long, Barclays: Equal Weight. Raises target to $236 from $224.
- T. Michael Walkley, Canaccord Genuity. Buy. Raises target to $265 from $260.
- Laura Martin, Needham: Buy. Raises target to $280 from $250.
- Jeffrey Kvaal, Nomura: Neutral. Raises target to $225 from $205.
- Jeriel Ong, Deutsche Bank: Hold. Raises target to $235 from $230.
- Krish Sankar, Cowen: Outperform. Raises target to $290 from $250