Canaccord Genuity cuts Apple target $45 to $300

But analyst T. Michael Walkley, still a Buy, thinks Apple is well positioned to ride out the shock.

From a note to clients that landed on my desktop Thursday morning:

Despite the near-term uncertain supply and demand environment for Apple’s hardware products, Apple is well-positioned to benefit from the long-term 5G investment cycle and anticipate recovering earnings in C2021 as 5G smartphones ramp. Further, Apple’s ecosystem approach, including an installed base that exceeds 1.5B devices globally, should continue to generate strong services revenue, and we expect the higher-margin services revenue growth to outpace total company growth.

Ahead of the COVID-19 shock to global economies, we were encouraged by the strong demand for the iPhone 11 lineup and believe Apple will maintain its market share leadership of premium-tier smartphones that could be bolstered by a 5G upgrade cycle with potentially improved consumer demand longer-term.

Apple has market share leading positions in wearables with Watch and AirPods, and both have recently had strong sales and growth momentum. With $99B in net cash, Apple has a strong balance sheet to continue to invest and support long-term growth…

As we struggle to determine the near-term smartphone market impact associated with the coronavirus—we anticipate a soft June quarter followed by improving trends… For C2021, we have modeled iPhone units of 183M versus our previous 218M estimate. We hope this estimate proves conservative as our new estimate is below 2019 iPhone unit sales. There is also the potential for a stronger snapback demand following potentially weak C2020 smartphone sales. While we anticipate the market should recover in the September quarter, we anticipate steadily improving trends versus the potential for a more V-shaped recovery. The impact of our lowered estimates results in us lowering ourC’20/C’21 EPS estimates from $14.09/$16.76 to $12.04/$14.97, and we reduce our price target from $345 to $300 accordingly.

Maintains Buy rating, lowers price target to $300 from $345. 

My take: “Soft June followed by improving trends” is probably the best we can hope for.

Below: Updated target cut chart. And then there were nine….

apple canaccord cuts 300

10 Comments

  1. Gregg Thurman said:
    Soft June followed by improving trends”

    The June quarter is always the softest of the year, with the July 4th week the softest week of the year.

    I’d be looking for a sustained rebound starting with the July 4th week.

    2
    March 19, 2020
  2. Gregg Thurman said:
    We’ve got more than COVID-19 inspired production and demand problems staring at us.

    For the past several months the US$ traded with a relative value between $96 and $98. It is now trading with a relative value of $102+. That change in currency exchange is going to eat into offshore revenues, or seriously impact gross margins should AAPL decide to eat the value increase. Either way this isn’t good news.

    1
    March 19, 2020
    • George Ewonus said:
      Excellent point, Gregg. Since my APPL shares get converted to CAD it’s a small benefit for me. Of course in the long run it will certainly eat into revenues.

      0
      March 19, 2020
  3. Jerry Doyle said:
    Installed base of 1.5B+. The install base continues to grow, if that figure is correct.

    It surprises me that we are not hearing companies asking for suspension of earning calls during this period of uncertainty due to the novel coronavirus.

    1
    March 19, 2020
  4. David Emery said:
    Gregg’s 2 points together are telling. It’s quite possible we see a relative surge in sales once the recovery starts, coupled with exchange rate eating up some of the revenue.

    On a related note, my wife’s Air Pod Pros shipped 10 days earlier than originally predicted by Apple.

    1
    March 19, 2020
  5. Steven Philips said:
    This may be where the reduced interest rates will help. There may be a lot of deals offered via Apple and/or other retailers just to get business flowing again.

    0
    March 19, 2020
  6. Gregg Thurman said:
    Everything is locked down, restaurants, theaters, etc. My personal consumption of Apple TV+ content (beyond streaming) has increased in the last two weeks. I wonder how it is in the broader iOS world.

    0
    March 19, 2020

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