Piper Sandler hikes price target after Apple crushes in teen survey

A record 85% of U.S. teens own an iPhone, a record 88% want one.

From a note to clients by analyst Harsh Kumar that landed on my desktop Wednesday:

Apple’s share of smartphone ownership increased in the Spring-20 Piper Sandler Taking Stock With Teens survey. Of the 5,200+ respondents, 85% have an iPhone, the highest percentage we have seen in our survey and up from 83% in the Spring-19 and Fall-19 surveys. In addition, iPhone may have room to move higher, with 88% of teens anticipating their next phone to be an iPhone. This metric is also the highest ever in our survey history and up from 86% over the past three surveys. Android was the runner-up with 8% of anticipated purchases, down from 10% in the Fall-19 survey. Apple Watch was the top smartwatch among teens, garnering 25% share, up from 20% in the Fall-19 survey. Overall, we view the survey results as a sign that Apple’s place as a dominant device brand among teens remains well intact…

We introduced an Apple AirPods ownership question in our Spring-20 survey, and of the 5,200+ respondents, 52% of teens noted they already own AirPods. In addition, 18% of respondents noted that they do not currently own the product but plan to buy them within the next 12 months. Overall, we believe the already strong attach rate and solid purchase intent demonstrates Apple’s ability to drive additional hardware growth outside of the company’s primary product set…

Overall, we believe results continue to suggest a strong preference for Apple products among American teens. We believe these trends remain important as the company looks to drive services revenue and complementary hardware products (like AirPods) in order to drive further revenue growth. In addition, while the premium smartphone market has largely become a mature market, we believe Apple’s ability to maintain and slightly grow its market share provides a solid base for a 5G product cycle refresh over the next few years.

Maintains Overweight rating and raise price target to $300 from $260. 

Note: These are relatively well-heeled teens. They come from zip codes where the average household income is (or was) $65,600; a quarter come from zip codes averaging $103,800.

My take: This is the first Apple price target hike since COVID-19 hit.

7 Comments

  1. Jacob Feenstra said:
    This demographic support of Apple among young people continues to be strong and growing. The same I’ve noticed in Europe—maybe even more pronounced. I’m not totally sure what drives it but likely a combination of quality, integration, security and image. This demographic support is definitely part of the strong foundation and economic health of Apple. Interesting that Kumar should bring that up now when others are looking at negative impacts. But he was definitely too low in his price target.

    1
    April 8, 2020
    • John Konopka said:
      Some of this is due to iMessage. No one wants to be the green bubble friend.

      0
      April 8, 2020
  2. Miguel Ancira said:
    This pull back is an opportunity for some analysts to hike their price targets and not be seen as chasing the stock price. The fact that AAPL does not want to squeeze as much as they can from each subscriber as well as looking out for our privacy and our overall experience is a good long term stragegy.

    0
    April 8, 2020
  3. Dan Scropos said:
    These are staggering numbers. This is potentially a 40-50 year runway for products and Services. Apple’s brand lead and chip lead, coupled with a culture that is second to none, seems to be more obstacles than the competition can collectively hurdle, never mind doing so singularly.

    The aforementioned lead is Apple’s to lose. This exemplifies not only why products must be ready before they come to market, but also why Apple’s ecosystem is truly the only one that provides both privacy and user experience. One can make a strong argument that they are the only ecosystem, period. Competitors are a fragmented mess of malware/spyware. Analysts and institutions are finding out what many of us have long known, in that Apple’s only competition are its own standards and ideals.

    1
    April 8, 2020
  4. Gregg Thurman said:
    These are relatively well-heeled teens.

    It’s called the Veldon effect (conspicuous consumption), something they learned from their “well-heeled” parents.

    But isn’t that exactly Apple’s target demographic?

    1
    April 8, 2020
    • Fred Stein said:
      Right re demographic. While Apple’s nearly 1B iPhone install base includes many not-so-well-off, the bulk of the revenue and profit come from people with discretionary income.

      Apple supports older iPhones, a boon to the budget constrained folks in the IB. Smart. Enlightened self-interest.

      1
      April 8, 2020

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