With Apple hovering around $130, analyst David Vogt justifies sticking with his soggy $115 price target.
Monthly China smartphone data suggests overall iPhone demand in China was +52% in the month of December and ~+37% in the December quarter. However, despite the strong reported unit growth, we think recent growth rates are flattered by the shift in the launch of the iPhone 12 into October this year compared to the September launch of the iPhone 11 last year. As such, comparing iPhone unit sales in both years on a trailing six month basis to capture the different launch dates suggests iPhone units increased just 0.9% year-over-year in the second half of the year. While prior unit softness was reflected in Apple’s September quarterly results we believe a six month comparison is useful to “smooth” out demand to gauge a more normalized demand backdrop. Lastly, on a full year basis, we estimate iPhone units in China declined roughly 4% despite the strong uplift in the December quarter.
Valuation Method and Risk Statement Risks to our Apple thesis include (1) product delays or less innovative offerings, particularly a decline in iPhone unit shipments in F21; (2) macro weakness dampening product demand, especially in China; (3) reduced product differentiation resulting in a successful smartphone attack from below; (4) governments looking to regulate Apple as its power increases, and (5) poor platform management. We use P/E to derive our price target for Apple.
Maintains Neutral rating and $115 price target.
My take: Mr. Glass Half-Empty.