With Apple at $315, Wells Fargo sticks with $245 target

From a note to client by analyst Aaron Rakers that landed on my desktop Wednesday:

Wells Fargo Analysis Supports High-60M Total 4Q19 iPhone Ship: As shown in the charts on the following pages, we have found a high historical correlation (R2 = 0.94) with Apple’s iPhone shipments, excluding China. If we were to apply this historical correlation for 4Q19, we would be left to estimate implied iPhone shipment (ex-China) to increase in the low-single digit range y/y, or implying the high-50 million range – we would note this is down from our prior analysis using the historical contribution of October + November data that suggested the low-60M range. Coupled with our prior analysis of internal China smartphone registrations (link to note; pgs. 15-16), we think this data could leave us to estimate total 4Q19 shipments implied in the high-60M unit range vs. our current estimate of 68.9M (street: 67.5M).

Maintains Market Perform rating and (soggy) $245 price target.

Cue the charts:

apple wells fargo 245

apple wells fargo 245Click to enlarge. 

My take: Rakers is still counting iPhones.

7 Comments

  1. Gregg Thurman said:

    In the near term iPhones remain an important component of Apple’s business. Commencing with FY2021 not so much. Obviously Rakers isn’t looking far into the future. Does myopia come to mind?

    2
    January 15, 2020
  2. Gregg Thurman said:

    Is that Raker stuck in the Brea tar pits?

    1
    January 15, 2020
  3. Fred Stein said:

    He’s driving by looking in the rear view mirror.

    Historical correlations based on iPhone sales says little about future multi-year cash flow, which should be the primary basis for a PT. The second most important PT driver in multiple expansion and the factors driving that, also not mentioned.

    2
    January 15, 2020
    • David Emery said:

      Furthermore, his most recent data is suspect, given Apple is no longer disclosing phone sales numbers.

      I still remember high school physics and calculating error ranges, particularly when you started getting questionable data…

      3
      January 15, 2020
  4. Aaron Belich said:

    Le sigh…

    I’m really excited for whatever Apple reports and DED’s next article smashing these terrible analyst’s theories into the dust of history.

    0
    January 15, 2020
  5. Kirk DeBernardi said:

    Poor bastards. They take the easy way out by continuing to primarily worry about the bean count of iPhones. Sad they can’t see the forest for the hill of beans.

    I wish someone of their ilk would dig a bit deeper into the psyche of what’s really going on. At least consider this in the mix — what I think is best referred to as the “Apple Trifecta” — iPhone.  WATCH. AirPods.

    While already mentioned on this blog as a force to be reckoned with, most observers don’t adequately consider the full “moat” momentum this carries for Apple’s future.

    Three devices holding hands in a unified and harmonious system that’s utilized for most things, most anywhere and at most anytime. A big chunk of a life can fit into this trifecta.

    Who has a better designed, more utilized, more appreciated, more convenient and more personal life-systems implementation than this?

    Anyone?

    Crickets.

    Anyone?

    (I’ll wait here, counting my beans.)

    1
    January 16, 2020

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