Why 7 Apple Analysts Say Investors Should Take A Bite Of The Stock After Q1 Blowout

Apple Inc AAPL reported Thursday strong quarterly results, buoyed by across-the-board strength.

The Apple Analyst: Morgan Stanley analyst Katy Huberty maintained an Overweight rating for Apple shares and increased the price target from $200 to $210.

Needham analyst Laura Martin maintained a Buy rating and $170 price target.

Raymond James analyst Chris Caso reiterated an Outperform rating and increased the price target from $185 to $190.

Wedbush analyst Daniel Ives maintained an Outperform rating and $200 price target.

KeyBanc Capital Markets analyst Brandon Nispel maintained an Overweight rating and a $191 price target.

Apple Theses:

Morgan Stanley Sees Apple's iPhone Ecosystem A Clear Differentiator: It was a clean December quarter beat for Apple, with revenue, gross margin and EPS, all exceeding consensus estimates, Morgan Stanley analyst Huberty said in a note. Mac and Services growth remained particularly strong, he added.

This stronger-than-expected March quarter guidance highlights the strength and stickiness of Apple's ecosystem of 1.1 billion iPhones is a clear differentiator in a challenging market environment, the analyst said.

Cupertino's robust innovation engine, Huberty said, supports a growing pipeline of new products and services, suggesting ample room to grow both hardware and services revenue per user.

Needham's 10 Takeaways From Q1: Needham analyst Martin listed the following as the firm's 10 key takeaways from Apple's first-quarter results:
- Apple's installed base of active devices at an all-time high of 1.8 billion and paid subscribers at 785 million, suggesting 44% penetration
- Strong margin expansion
- China revenues up 21% year-over-year, showing no negative geopolitical impact
- Health options likely to represent a larger aspect of iPhones and wearables differentiation
- Apple TV ignoring audience segmentation that is preventing the company from making serious gains in streaming
- Supply constraints and chip shortages becoming less of a headwind in the March quarter
- Apple card and Apple pay, health alerts for wearables and innovative apps and services likely to be top growth areas
- All-time high revenues including both Products and Services
- Apple seeing opportunities in the metaverse
- Updates on the balance sheet, free cash flow and return of capital

Related Link: Apple Becomes First Company To Top $3 Trillion Market Cap; Analyst Says Rally Has Further Legs

Raymond James Dissects March Quarter Guidance: Apple guided to solid but decelerating year-over-year growth in the March quarter, against strong comps in the year-ago quarter due to late iPhone launch in 2020, Raymond James analyst Caso noted.

The guidance implies 5% to 6% growth, above Raymond Jame's estimates and well above the consensus, as some easing in supply constraints allow Apple to catch up on unfulfilled demand, the analyst said.

"Looking ahead, we think constraints over the last two years have likely tended to extend the 5G upgrade cycle, and means that iPhone can still manage to grow next year," the analyst said in the note.

The growing installed base will continue to pay dividends for services growth, the analyst said. The next "one more thing" is likely to be VR, although the product may not arrive in 2022, he added.

Wedbush Sees Quarterly Performance As ‘Stunner': Overall, with about $10 billion already pushed due to the supply chain in the quarter, this quarter is a "stunner" on iPhone/Services demand and Cupertino's ability to navigate a supply chain shortage in almost Teflon-like fashion, Wedbush analyst Ives said.

KeyBanc Recommends Buying Apple Shares: Mac and iPhone drove upside to Products revenue, and 785 million paid subscriptions drove Services growth and margin upside, KeyBanc analyst Nispel said. The active base of installed devices grew at a healthy 9% rate, he added.

"With the stock pullback and demand signs strong, we see the pullback as an opportunity to add to positions," the analyst said.

Tigress Financial Sees Further Upside From Current Levels: The strong first-quarter performance was a function of innovation and strong customer demand, as Apple managed through supply chain issues, Tigress Financial analyst Ivan Feinseth said.

Strong customer response to new products and services launches drove an all-time high for its installed base of active users, the analyst said. All products, except the iPad, experienced record demand, he added.

Apple also announced several new service initiatives, including a new integrated payment platform for iPhones enabling small businesses to accept electronic payments without additional hardware, the analyst noted.

"I continue to believe further upside exists from current levels and continue to recommend purchase," the analyst said.

Munster Sees Apple At $250 In Next 2 Years: Apple's quarterly results come at a time when tech investors are on the edge, Loup Funds Managing Partner Gene Munster said. Against this backdrop, Apple shares may not get proper credit in the near term for the results but will be fairly rewarded over the long term, the analyst added.

The company, Munster said, will keep making the best consumer tech in the world, and things will keep turning out this way.

Over the next two years, the analyst believes Apple shares can reach $250. This is premised on the belief that a multi-year iPhone 5G upgrade cycle will lead the company to $7 per share in fiscal-year 2023 earnings, he added.

The Street, however, is currently at $6.20, he noted.

Additionally, investor anticipation of the new addressable markets over the next five years — including the metaverse and autonomy — will likely increase Apple's valuation multiple to 35 times, Munster said.

APPL Price Action: At last check, Apple shares were adding 4.72% to $166.73 Friday morning at publication.

Related Link: Apple's Q1 Results A 'Major Statement Of iPhone/Services Demand': Analyst

Photo by Laurenz Heymann on Unsplash

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Posted In: Analyst ColorEarningsNewsPrice TargetReiterationTop StoriesAnalyst RatingsTechBrandon NispelChris CasoDaniel IvesGene MunsterIvan FeinsethKaty HubertyKeyBanc Capital MarketsLaura MartinLoup FundsMorgan StanleyNeedhamRaymond JamesTigress FinancialWedbush
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