shares are ratcheting higher as investors pile into megacap tech shares ahead of the coming wave of December-quarter earnings reports. Apple will report results next Wednesday, Jan. 27, and Street expectations are growing more bullish by the day, leaving its shares just a few points below their all-time highs.
Morgan Stanley analyst Katy Huberty on Thursday reiterated her Overweight rating on Apple stock and lifted her price target to $152 from $144. She writes that her checks find that Apple saw strength across its products and services portfolio in the quarter, driven by 5G iPhone adoption, the work-and-learn-from-home trend, and sustained engagement with the App Store.
“We are buyers ahead of what we expect to be a record December quarter print,” Huberty writes in a research note. “Our recent conversations suggest investors expect Apple to release solid, but not great, December quarter results. We disagree and believe that Apple is likely to report all-time record quarterly revenue and earnings.”
Huberty expects double-digit revenue growth in all revenue segments, with “risks skewed to the upside” for iPhones, Macs, and Services. Her revenue estimate for the quarter is $108.2 billion, well above consensus at $102.6 billion. She sees profits for the December quarter of $1.50 a share, above the Street at $1.40. (Note that the company didn’t provide any guidance for this quarter, citing the uncertainty associated with the pandemic.)
“We expect demand strength to continue and our fiscal 2021 revenue and EPS estimates are both 5% above consensus,” she writes. “Given positioning into the quarter is muted after the rotation out of high quality stocks over the past several months, we expect strong follow through post-earnings.”
Huberty thinks the iPhone 12 was Apple’s most successful product launch in the past five years. She forecasts 78 million iPhones shipped in the quarter at an average selling price of $825, delivering 14% revenue growth to $63.9 billion—twice the growth rate the Street consensus currently projects for iPhone revenue. And she expects the momentum in iPhones to continue into 2021. She notes that Apple’s Taiwanese supply-chain partners had have three consecutive months of accelerating year-over-year sales growth, which she thinks signals strong iPhone sales in the coming quarters.
D.A. Davidson analyst Tom Forte also repeated his Buy rating on the stock, noting that the stock looks “delicious,” though it has pushed past his $133 price target. (He says his target is “under review” pending next week’s earnings report.) Forte also has estimates above consensus for the quarter—he sees $106.2 billion in sales, with profits of $1.52 a share. “We believe Apple’s first lineup of smartphones on 5G networks are better positioned than investors completely appreciate,” he writes in a research note.
Monness Crespi Hardt analyst Brian White also repeats his Buy rating, while maintaining his $144 target price. White’s estimates call for $105.3 billion in sales and profits of $1.47 a share. “The strength and linearity of this economic recovery remains a wildcard; however, we believe Apple’s strong balance sheet, iconic brand, rapidly growing services business, pipeline of innovations and hardline stance on personal privacy will allow the company to emerge from this crisis stronger,” he writes.
Apple shares are up 3.1%, at $136.10, in recent trading. The stock is up more than 6% in the first two days of the Biden Administration, increasing its market cap over that short period by $133 billion. The stock sits a hair below its all-time closing high of $136.69, reached on Dec. 28, 2020, as well its record intraday peak of $138.79, which it touched on Dec. 29. Apple shares have a market valuation of $2.278 trillion, and Apple remains the world’s most valuable company.
Write to Eric J. Savitz at [email protected]