"Apple remains our favorite tech name."
From a note to clients that landed on my desktop Wednesday:
Our Asia supply chain checks on Apple over the last few weeks remain very firm (further slight improvement) as Cupertino is in the final stages of setting up for its iPhone 14 release in mid September with invites likely coming in the coming weeks.
We believe the initial order for 90 million iPhone 14 units out of the gates has stayed firm and will be roughly roughly flat with iPhone 13 despite the macro storm clouds. This speaks to the underlying demand story that Apple anticipates for this next iPhone release with our estimates that 240 million of 1 billion iPhone users worldwide have not upgraded their phones in over 3.5 years.
In particular we believe Apple is expecting another heavy iPhone Pro and Pro Max mix shift which is a clear positive for ASPs heading into FY23. While the base iPhone will stay at the same price we believe a $100 price increase on the iPhone 14 Pro/Pro Max is likely in store given component price increases as well as added functionality on this new release.
From a spec perspective, iPhone 14 will have enhanced camera technology (48-megapixel), while we believe the iPhone 14 Pro models will also have the innovative A16 chip as more consumers head down the Pro path. There will also possibly be some storage enhancements on both the base iPhone 14/Pro...
Services looks strong into FY2023. With Apple's services business set to be roughly $90 billion in FY23 and set to eclipse the $100 billion threshold in FY24 with this double digit growth pace showing healthy demand ahead, we believe this key revenue stream remains at the epicenter of Apple's multiple and growth story during this market storm. On a growth and EBITDA basis, we believe Apple's services business is worth alone north of $1 trillion which coupled with the flagship hardware business makes the risk/reward very compelling at current levels.
In a nutshell, we believe Apple's growth story remains well intact with clear momentum around iPhone 14 around the corner despite the shaky macro. Apple remains our favorite tech name.
Maintains Outperform rating and raises price target to $220 from $200.
My take: After several months in the lower ranks, Ives once again has pride of place in my price target spreadsheet.