Just before the stock got clobbered Thursday and fell below $336, analyst Wamsi Mohan raised his price target to $390 from $350. Here’s why…
From a note to clients by analyst Wamsi Mohan that landed on my desktop Thursday:
Shares of Apple hit a new all-time high at yesterday’s closing price of $352.84. We see several drivers that explain this move
- Heading into a product cycle (5G iPhones) the multiple typically expands,
- Product (Hardware) revenues largely thought to be ex- growth will grow 20% next year from iPhone and wearables,
- Other large cap tech companies carry more risks of regulation or compares get tougher in some instances vs. easy compares for AAPL next year,
- Stability of cash flows demands a higher multiple (proven to be resilient through covid-19),
- Gross margins benefit from continued insourcing and services mix (somewhat offset by content amortization and higher bill of materials for 5G),
- High level of investment preceding new product categories (Augmented Reality Glasses, healthcare, autonomous efforts etc.) and
- Market multiple has expanded by 2x turns from pre-covid levels.
Maintains Buy rating, raises price target to (Street-high) $390 from $350.
My take: Seem like good reasons to me. Too bad Mr. Market had other things on his mind.