With Apple below $260, Wedbush maintains $400 price target

From a note to clients by analyst Daniel Ives that landed on my desktop Friday:

Today Apple officially reopened all of its 42 stores across mainland China including the flagship ones in Beijing. This is another important step forward toward heading down the normalization path in this key region for Apple… Now all eyes of the Street are around normalizing the supply chain by late April/early May and trying to better understand the demand trajectory in China over the coming quarters…

With markets seeing an avalanche of selling pressuring, we encourage investors to take a deep breath and focus on the tech winners for the next 5-10 years including Apple front and center. While this is very nervous time for consumers, companies, investors, etc., we caution that Chinese demand in the March quarter is not the trend, but a “shock event” that we believe will be short lived as normalized iPhone demand trends start to take hold in 2H in China and across the globe. While the supply chain issues and China demand shift are near- term fundamental headwinds, our primary focus is that the first part of this massive upgrade opportunity on the horizon with 5G leading the way should still be in the 215 million to 220 million unit range looking out to FY21.

Maintains Outperform rating and (Street high) $400 price target. 

My take: If the economy slips into a recession, some of these price targets will have to come back to earth. So far, as near as I can tell, only three have slipped: Merrill Lynch (to $320), UBS ($335) and Deutsche Bank ($295). See here. Wells Fargo, on the other hand, upgraded the stock to Overweight from Equal weight.

10 Comments

  1. Mordechai Beizer said:
    I think there might even be an upside. Apple is in a great position to sell more gear for people doing remote work, remote learning, etc. I saw PED’s earlier post about iPads being in very high demand in China, I wouldn’t be surprised to see something similar happen elsewhere. As long as the supply chain can deliver product Apple may end up with great sales, not just for iPads but for the whole panoply of products driven by social distancing concerns.

    0
    March 13, 2020
  2. John Konopka said:
    I’m feeling whiplash. Apple up almost $30 today.

    1
    March 13, 2020
  3. Fred Stein said:
    We likely hit bottom at $250.

    While the rest of the market digests COVID-19 and ripple effects, AAPL becomes a safe haven and a growth stock.

    2
    March 13, 2020
  4. Jerry Doyle said:
    “…. My take: If the economy slips into a recession, some of these price targets will have to come back to earth.”

    There is much talk about the economy slipping into a recession. Some are saying that the economy already is in an economic recession. I question that we will “feel” a recession. Notice that I put “feel” in quotation marks.

    When the data points come forth at the end of the quarter those data points may portend that we are in an economic recession, but it would be a technical recession as oppose to a “practical” recession. Isn’t the purpose of the FED stimulus and the president’s and Congress’ economic stimulus announced this afternoon to pump huge amounts of liquidity into the economy and to keep folk employed, to keep mom and pop’s shop doors opened, to keep businesses ready to hum once the virus has passed? No one is out of work based on what we are being told. No jobs are lost. The whole idea behind Congress’ plan is to ensure folk do not lose their jobs and to ensure that businesses do not go under. So, from a practical standpoint it is difficult to say we truly are in a recession when all is the same as before; businesses up and running and folk still employed. Once we get pass this virus, everything returns to normal and the revenues from sales start flowing as before. Am I missing something here? If so, then please elucidate matters for me.

    In summary, based on what I wrote above I understand fully where Daniel Ives is coming from in his maintaining a $400 price target, although he does not denote a price target date to go with that $400.

    I now am more optimistic today than a couple of days ago. I am beginning to see a $400 price target by the end of Q2 2021.

    2
    March 13, 2020
    • Jerry Doyle said:
      I like to add an addendum to my comments above.

      It is conceivable that we may see a bump in economic activity once the virus is passed and people return to normal daily activities of living and to normal business as usual.

      People will feel the need to go out and mingle, to shop, go to restaurants, travel and to start making social connections again.

      Businesses will feel compelled to make those face-to-face interactions, set up meetings, go on trips, and advertise sales.

      I can see where we may have a spurt in economic activity once the virus passes and people venture out into doing their normal routines.

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      March 13, 2020
  5. Kirk DeBernardi said:
    On the last page of any analysis, none of this works unless money and people are in motion.

    1
    March 13, 2020
    • Jerry Doyle said:
      @Kirk DeBernardi: “…. On the last page of any analysis, none of this works unless money and people are in motion.”

      Precisely, Kirk. If I understand Congress emergency aid package and what the FED is doing and will do more of in the coming weeks, then huge amounts of liquidity are being pumped into the economy to keep people employed, to keep businesses afloat, to keep the economy going until the virus passes. So, I ask the question why is one saying that we are going into a recession. People are not losing their jobs. Businesses are not going under. If I understand clearly what the emergency aid package Congress has put together and will continue to put together “more of” in the coming weeks along with what the FED is doing to get us through this virus phase until it dissipates, then I do not understand this talk of an economic recession.

      1
      March 13, 2020

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