Evercore takes deep dive into Apple ‘reality wars,’ raises target to $210

“Conservatively, should the AR offering have a comparable trajectory as Apple Watch it could contribute $18.1B to sales. In a bullish scenario…” — Analyst Amit Daryanani

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

ALL YOU NEED TO KNOW: We think investors continue to underappreciate AAPL’s potential to innovate and enter new markets where they can leverage and scale AAPL’s unique platform and vertical integration capabilities. AR/VR have become a hot topic post FB’s pivot to the metaverse, but AAPL has been working on AR/VR solutions for the last 4+ years and we expect the hype into a formal launch in late 2022 to serve as a catalyst to the stock price.

An AR/VR device enables AAPL to extend their iOS and importantly their AppStore from iPhone to the VR world. Given the confluence of various AAPL patents (100+), acquisitions (Xnor.Ai, SensoMatic, NextVR, & more), app development resources, we believe it’s a high probability AAPL launches AR/VR headsets (internally dubbed N301) and/or Apple Glass (internally N421) over next 6-12-months.

Conservatively, should the AR offering have a comparable trajectory as Apple Watch it could contribute $18.1B to sales and 19c EPS at scale (~4-5% of current estimates). In a bullish scenario, should the adoption trend be close to AirPods the contribution could be $38B in sales and ~41c in EPS at scale (~8% contribution to sales/EPS).

We think the implied trust AAPL has built across both consumers and developer community could prove to be a key enabler for AAPL’s success. A recent (June-2021) survey by Brew-Harris suggested that 35% of consumers would prefer to buy an AAPL AR device (despite AAPL not having a formal product in the market)!

Net/net: We expect CY22 to be a strong year for new product launches ranging from i) iPhone SE3 in Q1, 2) Apple AR/VR, 3) iPhone 14 and More. Sticking with OP rating and taking target to $210 as we see wearables becoming an important growth vector.

Maintains Outperform rating, raises price target to $210 from $180.

My take: There’s a lot packed into this 30 page note, including lists of recent hires and personnel moves, patents filed in the last year and potential use cases — from 3D surgery to immersive live sports broadcasts.

10 Comments

  1. Romeo A Esparrago Jr said:
    210 makes yesterday’s close of 175 a bargain buy!

    2
    January 13, 2022
  2. Jeff Galanti said:
    What makes me so confident that Apple will do so well in this field is not that they will hit the cover off of the ball right out of the gates but that they will imperceptibly morph the product and its value proposition over time based on data and feedback. The Apple Watch now is a very different product than what was originally envisioned. At the start, it was much more about fashion and an app ecosystem similar to iPhone’s. The fashion part has been traded for functionality and practicality and the app ecosystem is shrinking. But Apple Watch is becoming more and more popular.

    The culture at Apple is so good at making these subtle changes without getting egg on their face. More clumsy tech companies will slam on brakes, do 180s, etc. Apple just slowly keeps skating to where the puck is going.

    4
    January 13, 2022
    • Dan Scropos said:
      Well said. Herein lies a major differentiating factor between Steve Jobs and Tim Cook. Steve Jobs told the customer exactly what they needed. Tim Cook walks the tightrope that stays true to the product or Service’s Northstar, while also tweaking to feedback.

      Steve Jobs’ refusal to change the iPhone’s screen size as the landscape of smartphones changed may have made this a COMPLETELY looking Apple had it not been for his untimely passing. Tim Cook answered the bell immediately with a larger iPhone. In all fairness to SJ, this may have already been in the works before his passing. However, his words, best I can remember, seemed to indicate otherwise.

      0
      January 13, 2022
  3. Bart Yee said:
    How could we obtain or view this Evercore note in full? It would be most illuminating. A year or two from now instead of reading it from an iPhone or iPad, I would visualize it in space against an AR background like a projection screen.

    0
    January 13, 2022
    • Evercore shares full-reports only with their clients. They are a huge, prestigious advisory firm (1,500+ staff) charging fees equivalent to the value of their research to big investors. It’s wonderful we get big slices of all these different banks & advisors reports, subscriptions and other expensive sources for only 2 C-notes/year. Sharing whole $$$ reports wholesale quickly gets one cut-off or even more unpleasant results. Fair use mandates small excerpts only as I understand it. Thanks!

      1
      January 13, 2022
  4. Robert Paul Leitao said:
    Every Street analyst I actively track has added mention of Apple’s entry into the metaverse to their narrative and the benefit of Apple’s entry into this new “digital frontier” to their recently revised price targets. Sometimes it’s worth listening to Apple analysts on the Street. Apple’s entry into the metaverse wouldn’t be mentioned in narrative or reflected in price targets if there isn’t a high degree of confidence something significant will be announced within a year.

    1
    January 13, 2022
  5. Michael Goldfeder said:
    Maybe PED and Robert can invite Analyst Amit Daryanani for an Apple 3.0 zoom call?

    3
    January 13, 2022

Leave a Reply