From a note to clients by analyst Samik Chatterjee that landed on my desktop Wednesday:
Expectations for a 5G driven “super cycle” are running up against headwinds to investor sentiment in relation to limited data points [that have] yet to indicate upside on 5G iPhone volumes relative to bullish expectations.
We are heading into year-end with more clarity on modest upside drivers on a stand-alone basis, including [work from home] WFH tailwinds for Mac/iPad, and anecdotal evidence on strength in Wearables, but on the flip-side less clarity in relation to upside on 5G iPhone volumes (although mix is better), leading us to maintain our above sell-side consensus estimates, but expect limited surprises for the bulls on the stock.
As discussed in the report published by JPM Apple Supply Chain analyst, William Yang, there are modest upside revisions to iPhone builds, but from iPhone 11 sales, which will do little to drive enthusiasm for 5G driven upside.
That said, we still expect ~20% upside for AAPL shares in 2021; although modest relative to recent years and more in line with the S&P 500 upside forecast from our Strategy team, on account of continuing upward revisions to sell-side estimates and modest upside to buy-side expectations from non-iPhone segments.
Maintains Overweight rating and $150 price target.
My take: We’re heading into year-end expecting more clarity from Chatterjee’s sentences.
“oh no what could the matter be,
three old analysts locked in the lavatory,
they wrote notes from Monday to Saturday, and nobody cared they were there.”
The song is a traditional English folk song that parodies the 16th-century traditional nursery rhyme ‘What Can the Matter Be?’, using its chorus melody as a base.
https://www.bl.uk/collection-items/three-old-ladies-stuck-in-the-lavatory
I doubt his note will survive 500 years, let alone become a contemporary parody.
Perhaps Samik Chatterjee’s note to clients speaks more of him then of Apple for whom modesty is never a prominent trademark.
“Well the iPhone 13 is more an incremental change and not worth the upgrade from an iPhone 12. In fact, the newly discounted older iPhone 12 now is the best Apple 5G value/play but this will depress ASPs and steal unit sales. Current FY Q1 2022 quarter comparisons will suffer relative to the blockbuster Q1 2021 despite a full sales quarter plus services growth and likely the same for Q2. Apple must accelerate its plans for foldables and bring back in-display fingerprint ID.”
“Despite bringing on two new foldables, in-display fingerprint ID, and new solid state Li batteries across the widest range of iPhones yet, these new iPhones just don’t excite. The iPhone market is surely saturated at 1.35B devices and the shine is off 5G now that 50% of developed nations have it rolled out.
The Watch 8 series will not be enough despite a new round format to compliment the flat sided and older rounded square models. Blood pressure and blood glucose sensors and new 12MP camera will not offset saturation in this market either. We also do not see how M2 and newest M3 Macs can continue to gain market share from their recent 12% of worldwide PC market, they just cannot compete with MSFT Windows 11 equipped PCs despite M3’s dominant performance and the new G2 graphics processors.
Despite Apple’s run in 2021 to $205 (a 57% gain over $130 at year end 2020) and the jump to $326 so far this year, it’s just unlikely that Apple can continue this run. The company is just overvalued at $4T market cap and the law of super-big numbers will catch up to them sooner than later. Look for retrenchment over 2022, price target $260.”
Comparisons will be difficult with Q1 2022’s surprise $115B revenue mark. Although we underestimated Apple that quarter, now that Covid is finally beaten back and WFH has abated, consumers will have so much more to spend on and compete with Apple hardware sales.
BTW, I really enjoyed the sarcasm. Happy holidays.