There’s a yellow brick road ahead for Apple, says Wedbush’s Daniel Ives

From a note to clients that landed on my desktop Sunday:

Apple will be hosting its first virtual product launch of 2021 this Tuesday which will kick off another major product refresh year for Cupertino. For this product launch the main focus of the event will be iPad refreshes for iPad Pro, iPad mini, and the low-cost iPad…

Taking a step back, in this WFH environment Apple has seen a major renaissance of growth from its iPad growth showing 40%+ YoY growth the last few quarters as more employees/students went through an iPad refresh. We estimate only ~40% of iPad users have gone through a refresh the last year with some clear pent-up demand that these new iPads will unleash in the next few quarters thus giving Apple another product tailwind… (emphasis his)

We believe Apple is heading into a robust period of growth led by its Services business, which saw considerable strength again in the March quarter based on our analysis. The services business we assign a $1.3 trillion dollar valuation range on a SOTP basis given the increasingly importance of this key revenue stream that is getting a new appreciation by investors as Cupertino further monetize its golden jewel installed base. While chip shortages linger, we believe Apple has a yellow brick road of growth ahead led by its iPhone supercycle and new product launches across its entire hardware ecosystem.

Maintains Outperform rating and Street-high $175 price target. 

My take: An unfortunate metaphor, with the fake Wizard and all, but I know what he means.

11 Comments

  1. David Emery said:
    So who gets to play the role of the cranky apple trees? Congress? Ah, the memes this could generate!!!

    (p.s. I always thought the flying monkeys were cool!)

    7
    April 18, 2021
    • Kirk DeBernardi said:
      @ David Emery —

      Agreed. The flying monkeys were fantasy-badass cool.

      5
      April 19, 2021
  2. Steven Philips said:
    Ms. Gulch could be a couple of Congress women! But the flying monkeys? That’s the rest just looking for hits!
    Let’s let those nightmares end and get back to Auntie Em – and uncle Tim!

    6
    April 18, 2021
  3. Michael Goldfeder said:
    @David Emery: The monkeys grew wings to get away from the wicked witch of the east. Much like Apple is updating their iOS to allow the hostages of App Trackers to escape without having to undergo genetic impossibilities.

    6
    April 18, 2021
  4. Robert Paul Leitao said:
    The WFH trend is continuing and will continue long after the pandemic is in the proverbial rear view mirror. It just makes sense. Apple’s best-in-class, world-leading products will remain in strong demand and Apple is smartly updating these products for better performance and more advanced graphics. These products capably equip the workforce of today and tomorrow. This isn’t wizardry. It’s good, old-fashioned hard work with a commitment to understanding the needs of the company’s expanding global customer base.

    7
    April 18, 2021
  5. Gregg Thurman said:
    I’m not concerned about what Apple may or may not introduce at this upcoming event.

    The reality is that whatever is announced it will be iterative just like nearly everything before it and WS will react unpredictably. On launch WS didn’t like the iMac, iPod, iPhone, iPad, Ear Pod, Apple Watch, Apple TV or ???, until those products came to dominate their respective categories, and even then AAPL sold off on the slightest rumor of a lower priced (never functionally better) competitor.

    There are many compelling reasons why Apple/AAPL will continue to grow, however it is nigh on impossible to attribute that growth on any single or combination of two or more factors.

    The only factor that counts, and WS has no way to measure it, is how the consumer is going to react, because in every case the consumer was asked they did the opposite of what they thought they would do, not having seen the product.

    In four or five quarters, after the consumer has spoken with his/her wallet, WS will have something tangible to measure. Even then WS will temper the data with, “but Samsung, Huawei, Oppo et al will introduce the same thing only cheaper”. Initially WS will appear correct because the buyers of cheap vastly outnumber the buyers of quality. But over time the buyers of cheap will tire of it and begin migrating to quality via second hand Apple products.

    11
    April 18, 2021
  6. Kirk DeBernardi said:
    “My take: An unfortunate metaphor, with the fake Wizard and all, but I know what he means.”

    @ PED —

    But don’t we all love the Wizardry in the Land of Oz?

    😉

    5
    April 19, 2021

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