Analyst Katy Huberty expects Apple’s shares to “re-rate” when the company reports its fiscal Q2 earnings next Wednesday.
From a note to clients that landed on my desktop Wednesday:
High confidence in March quarter beat as ecosystem strength set to shine. We see a positive setup into Apple’s F2Q21 earnings report next Wednesday and believe that a strong beat and raise March quarter combined with more muted institutional inventor positioning relative to F1Q earnings will help AAPL shares re-rate after YTD underperformance (AAPL +0.3% YTD vs. S&P 500 +10.8%).
Most importantly, we expect next week’s report to highlight the strength of Apple’s diverse product and services ecosystem, which continues to push the boundaries of what is possible on a computing device, and which was strengthened today by new iMac, iPad and AirTag product launches (see last paragraph).
Following our quarter-end checks, we are raising our March quarter revenue forecast to $80.2B (+38% Y/Y) and expect every revenue segment to grow at least 19% Y/Y, with Product revenue set to grow 43% Y/Y off a COVID-impacted March 2020 quarter.
Our March quarter revenue and EPS are now 4-5% ahead of consensus, with the most upside in iPad and Mac, while our new FY21 revenue and EPS forecasts are 4% ahead of consensus (2). Our sum-of-the-parts driven price target increases to $158 (from $157) on the back of these changes and we expect positive estimate revisions (rather than multiple expansion) to support share outperformance keeping us Overweight.
Tweaking March quarter iPhone revenue forecast 1% higher on stronger ASP trends; units unchanged. We forecast 52M iPhone shipments in F2Q (+42% Y/Y), which is largely in-line with implied iPhone shipments based on our Greater China Technology Hardware research team’s March quarter iPhone build forecast of 50.5M units (3). Our lead time tracker showed a normalization in lead times for all four iPhone 12 models in the March quarter (4), suggesting Apple was able to increase supply to meet exceptional demand, particularly for the iPhone 12 Pro models.
Maintains Overweight rating and raises target to $158 from $157.
My take: Katy is the best, but a $1 price hike is exactly the kind of target micromanagement Downtown Josh Brown was complaining about last week. See: ‘Why don’t you let them screw up before you get bearish on Apple?’ (video)
Katy is not micro-managing, she’s being transparent and data-driven – new data means new PT. Her update is due to higher EPS and not P/E multiple expansion. Very good news.
I have to think that $1 in $157 is well within the margin of error for these kinds of models. So I call “B.S.” on this change as being ‘data-driven’.
Actually sounds like a more solid target based on her EPS increase and multiple compression.
Like Josh Brown I say BS. Why did she even expend the effort? What has happened to our Katy? Guess she has been usurped by Daniel Ives.
https://www.cnbc.com/video/2021/04/21/cramer-on-goldman-morgan-stanleys-calls-on-apple-after-new-products-announcements.html?&qsearchterm=apple
It was interesting that we saw new products (iPad and iMac ) with the M1 but we didn’t yet see the M2 (or whatever they will call it) which would be for a higher end iMac and the Mac Pro. Apple is patiently following their game plan.
Her revenue is a few billion light, but it’s still nice to see a revenue estimate that starts with an 8.
Two things have changed in Katy’s Apple model:
1/ Earnings multiple has “compressed”,
2/ Earnings per Share has expanded.
The net result doesn’t contain as much fluff as a higher multiple does
Very, very fortunately, however, Apple’s cash flow has literally kept pace with the new valuation (chicken or egg; does it really matter?). And that cash flow increase is still happening, actually decreasing the lagging valuation precipitously while the price per share has appeared to stall.
Three more quarters of increasing cash flow stand before Apple. (What other companies of Apple’s size can make that claim?) Plenty of time for the stock price to reflect Apple’s true value.
Patience is a virtue.
we do not sell computers. as a retailer its difficult to make money on apple products.
they keep all the profits for themselve. thats why i bought apple shares.
the only way making money on apple as a dealer is buying the shares.
i did this 10 years ago and make now more money with the shares than with my shop.
we make money on carrier plans not on the phones.
but i predict apple will also eat windows. what happened to Nokia will repeat.
untill apple, Nokia had a market share of 60% in the netherlands.
to us seemed to be unbeatable.
so when apple started selling the iphone we really thought they could not beat Nokia.
also htc and blackberry were big
but only apple had good working touchscreens
we sold thousends of HTC Diamonds. they became really hot in use and the screens were not really working.
The iPhone was the only phone with a properly working touchscreen.
i think this did it.
Nokia HTC Blackberry all whiped away.
you think its impossible which it is, but still it happened.
and it will all happen again but now in the pc laptop market.
by developing the processor, OS and applications you become untouchable.
only Biden can hurt Apple and some sad people in Brussel.
Apple as disruptor! We keep forgetting about that aspect of the company. Even this Tile thing is about disruption.
Disruption is not the same thing as destruction. You cannot have change without disruption. And without change you ultimately only have stagnation, which is the most destructive force of all.
Apple should be given a medal for all it has done to promote disruption. Instead, the Congress-critters are mooing about what a “bully” Apple is!
What a joke!