Market Overview

Apple Is A Buy, Even If You Have Doubts About The iPhone

Share:
Apple Is A Buy, Even If You Have Doubts About The iPhone

Shares of Apple Inc. (NASDAQ: AAPL) were trading higher by nearly 1 percent early Monday morning after analysts at KeyBanc turned bullish on the stock. The firm's Andy Hargreaves upgraded Apple's stock to Overweight with a newly assigned $187 price target.

The prior Sector Weight rating on Apple's stock was based on expectations that iPhone sales will stagnate, Hargreaves explained in his upgrade note. While investors should still remain "somewhat pessimistic" concerning the iPhone's growth profile, the company has succeeded in expanding a market segmentation strategy that is driving average gross profit per user higher than previously expected.

Increased visibility into Apple's ability to realize greater pricing power and growth from services like the App Store implies the company is a "franchise with subscription-like qualities" and not just a "regular hardware business," Hargreaves continued. In fact, the importance of Apple showing unit volume growth has now diminished which in turn improves the risk to reward profile for owning Apple's stock.

This fact alone helps support a higher trading multiple for Apple's stock above its recent historical average, the analyst emphasized. Specifically, a more appropriate range for Apple's stock is 7x to 10x EV/EBITDA, or an average multiple of 8.5x through positive and negative cycles. This represents upside to the average multiple of 7.0x over the past four years.

A 7x to 10x EV/EBITDA multiple equates to a 13.5x to 18x P/E multiple on fiscal 2018 estimates, the analyst added. This also appears to be an encouraging multiple as it still represents a discount that is "well below" the current S&P 500 multiple of around 24x.

Related Links:

Google Search Trends Give Little Clue As To Whether New iPhones Are Gaining Traction

iPhone 8's Availability Is Tracking Better Than The iPhone 7, Munster Says

Latest Ratings for AAPL

DateFirmActionFromTo
May 2020B of A SecuritiesMaintainsBuy
May 2020Deutsche BankMaintainsBuy
May 2020WedbushMaintainsOutperform

View More Analyst Ratings for AAPL
View the Latest Analyst Ratings

 

Related Articles (AAPL)

View Comments and Join the Discussion!

Posted-In: Andy HargreavesAnalyst Color Long Ideas Upgrades Price Target Analyst Ratings Tech Trading Ideas Best of Benzinga

Latest Ratings

StockFirmActionPT
DEWilliam BlairUpgrades
SIXGoldman SachsInitiates Coverage On
HPQCFRAMaintains17.0
DLTRCFRAMaintains110.0
DGCFRAMaintains230.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com