Evercore issues a tactical retreat on Apple

From a note to clients by analyst Amit Daryanani that landed on my desktop Monday afternoon:

We are removing Apple from the tactical outperform list as the primary catalyst (Sept-qtr earnings) has played out. AAPL reported a strong Sept-qtr with a print of $64.7B/0.73 vs. street at $63.7B/$0.71 as strength across Macs, iPads, Wearables, and Services more than offset weaker iPhone revenues. While AAPL refrained from providing an explicit Dec-qtr guide, they do anticipate positive y/y growth across the portfolio and gross-margins remaining flat on a q/q basis.

Overall, given ongoing macro uncertainty, we think this is a prudent call especially as two of the four new iPhone products have not begun shipping yet (Pro Max and Mini). Fundamentally, we see an upside bias on the name driven by a) strong iPhone cycle that could drive better than seasonal growth over the next several quarters bolstered by carrier subsidies and elongated replacement cycles, b) Services growth while robust at 16% should accelerate as we see both an expansion of the iOS install base and uptick in monetization (AppleOne and more) and c) growth in hardware (ex-iPhone) should remain robust as well given new products and strong demand.

Net/Net: Sticking with our OP rating and $135 target as we see plenty of upside ahead.

From Evercore’s disclosure section:

Evercore ISI research reports may include a Tactical Call, which describes a near-term event or catalyst affecting the subject company or the market overall and which is expected to have a short-term price impact on the equity shares of the subject company. This Tactical Call is separate from the analyst’s long-term recommendation (Outperform, In Line or Underperform) that reflects a stock’s forward 12-month expected return, is not a formal rating and may differ from the target prices and recommendations reflected in the analyst’s long-term view.

My take: If this is Daryanani trying to say he was wrong to expect a short-term bump from Apple’s Q4 earnings but not wrong about the company’s medium-term prospects, there’s probably a better way to say it.

6 Comments

  1. Fred Stein said:
    Methinks he sees technical sell signals. Ignore. Let others play that game.

    Pay attention to $135 target (and forward P/E of 25).

    3
    November 2, 2020
  2. Gregg Thurman said:
    Fundamentally, we see an upside bias on the name driven by a) strong iPhone cycle that could drive better than seasonal growth over the next several quarters bolstered by carrier subsidies and elongated replacement cycles,

    Or to translate: “We think Apple’s long term future is very bright, we just don’t have any confidence in our conviction, being weak-ass WS analysts scared to death of being wrong to the upside”.

    6
    November 2, 2020
  3. Romeo A Esparrago Jr said:
    Well, since you’re using that painting of his retreat from Russia, then …

    “ Victory is not always winning the battle…but rising every time you fall. “

    – Napoleon Bonaparte

    2
    November 2, 2020
  4. Jerry Doyle said:
    I do not know how more crystal clear, or how more luminous and unambiguous Apple’s near term and long term stock price performance can be to one who studies the company and the geopolitical issues of the day. Apple is poised to leverage its formidable portfolio of products and services to capitalize on today’s macro or single geopolitical event that comes its way. Apple will be a $150 stock market listing price by the Q2 financial results call in late April 2021. WS analysts are experiencing a catharsis, no less than a spirit of edification that Apple is positioned strongly to do so. Ms. Katy Huberty understood that fact the other day and other WS analysts soon will understand it explicitly, too.

    0
    November 2, 2020
  5. Robert Paul Leitao said:
    I wouldn’t read anything into the note. Evercore is maintaining its Outperform rating and $135 price target. I follow a lot of companies and read a lot of notes from analysts. This is routine. Evercore remains positive on the company’s outlook and bullish on the shares. Many of the positives mentioned by management during the recent conference call are reiterated in this note. What’s now known is known. Evercore sees plenty of upside ahead. This note is certainly not a negative. It actually reiterates the firm’s positive stance.

    1
    November 2, 2020

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