Why Canaccord raised its Apple target $10 to $175

From a note to clients by analyst T. Michael Walkley that landed on my desktop Thursday:

Ahead of Apple’s earnings report on Tuesday, July 27, after the market close, we are increasing our estimates based on strong demand across the company’s products. Apple continues to demonstrate the strength of its product ecosystem, and we believe consensus estimates will prove conservative for Q3 results and Q4 guidance should Apple return to providing guidance.

Apple is well-positioned to continue to benefit from the 5G upgrade cycle, and we anticipate strong overall growth trends as 5G smartphones ramp and its installed base expands with higher-margins services revenue. Apple’s ecosystem approach, including an installed base that exceeds 1.65B devices globally and now over 1B iPhone users, should continue to generate strong services revenue.

Longer term, we expect the higher-margin services revenue growth to outpace total company growth and drive gross margin expansion. With $83B in net cash, Apple has a strong balance sheet to continue to invest and support long- term growth. With the 5G upgrade cycle likely a benefit through at least C2022, other hardware categories growing double-digits, and continued mix shift toward high-margin services, we believe the share price remains compelling for longer-term investors.

Maintains Buy rating, raises target to $175 from $165.

My take: Dusting off the spreadsheet.

10 Comments

  1. Fred Stein said:
    Predictably, analysts raise their targets when the market raises the price of AAPL. Thus the average PT remains at about 10% above.

    1
    July 22, 2021
  2. Gregg Thurman said:
    Another 90 day PT. I don’t have much problem with $175 if it is indeed an October target. If AAPL advances towards $175 too fast though, investors should expect a brief sell off.

    0
    July 22, 2021
    • Jerry Doyle said:
      @Gregg Thurman: Where do you see implied a 90 day PT? Part of my frustration with analysts PTs deals with their lack of target dates. Investopedia defines the period as 12 or 18 months. Some of us have discussed this subject & I believe it was you, brother Gregg, who mentioned that some analysts use a six months PT. I’ve never heard of a 3-month price target established by analysts. I assume that T. Michael Walkley’s TP is for 6-months out when Apple gives its earnings report late January 2022 for Q1 22. Then again, Walkley’s TP could be for one year. Three months? I don’t think so. Like you, if Apple trots to $175 by the next earnings call in late October for Q4 2021, then I suspect that will be a little too fast, too soon, but welcomed.

      0
      July 22, 2021
      • Gregg Thurman said:
        @Gregg Thurman: Where do you see implied a 90 day PT?

        It’s in his PT of $175. With a modest increase in ttm earnings and Investor Sentiment Multiple (33.38 at the Close), AAPL should clear that hurdle within the next 90 days.

        Wikipedia’s definition of 12 to 18 months is a theory. That theory does not stand up to reality.

        0
        July 23, 2021
  3. Bart Yee said:
    Another personal data point – was just at local Costco to pick up another iPad 8th Gen 128mb. The kiosk contains large cards that double as inventory and for checkout w/AppleCare. Most of the iPads and AirPods were quite low or sold out. Maybe a few more in the highest iPad Pro slots. The salesperson says they reorder stock about every 5-7 days or less, and get 12-15 units in at a time for each price or memory level. Checkout is easy with AppleCare available at checkout. Once picked up, they even register AppleCare for you right in the store. Very slick, low friction process, and of course, frictionless purchase with ApplePay.

    Meanwhile, I glance at the Samsung Galaxy S7 and A7 Tablets which are all on sale and lower priced.(20-25% off) and…almost full cardholders of every model. Apparently they had at least 20-30 of each model for this sale and have sold very few of them.

    Again, spoke to a salesperson and they said iPads outsell Samsung Android tablets >10:1 or more. They have to reorder iPads regularly whereas they had the Samsung sales displays for weeks.

    To me there hasn’t been much crimp to iPad supply at least from Costco except maybe the least expensive $329 iPad 8th 32gb in store.

    Checking delivery at Costco online:
    iPad 8th 32GB all colors, 4-5 days
    iPad 8th 128GB all colors 5 days
    iPad mini 5 64GB 5-6 days
    iPad mini 5 256GB gold 7 days
    iPad Air 4 64GB 4-6 days
    iPad Air 4 256GB 4-5 days
    iPad Pro 3 11” 128GB 5 days
    iPad Pro 3 11” 256GB 5 days
    iPad Pro 5 12.9 128GB 5-7 days
    iPad Pro 3 11” 512GB 5 days.

    I think Apple is keeping up with iPad demand so far this quarter.

    6
    July 22, 2021
  4. Horace Dediu said:
    I don’t see anything in this quote that was not public info 5 months ago. Most was true years ago.

    4
    July 23, 2021
    • David Emery said:
      But there are clicks to be made in restating facts! (It seems that investors, as a class, are characterized by ’90 day long-term memory’. Anything before the last quarter is quickly forgotten…)

      0
      July 23, 2021

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