Apple stock has pared back some of its recent gains, but an analyst at Baird sees plenty of reasons the shares can bounce back.
Baird analyst William Power raised his price target on Apple stock (ticker: AAPL) to $133 from $109. That’s the second-highest such target listed by FactSet, just behind Wedbush analyst Dan Ives’s $150 price target.
Citing insights from Baird’s September 2020 consumer survey of 1,500 people, Power says the iPhone is gaining share even as interest in buying a smartphone is consistent. He says 60% of U.S. respondents that plan to buy a smartphone intend to get an iPhone—near record levels for Apple.
“Our latest consumer survey reinforces the strength of the ecosystem, including further iPhone share gains, strong wearables growth and potential 5G upgrade upside,” he wrote. “With the latest product unveils scheduled for September 15, we expect AAPL products to benefit from the growing need for connectivity solutions.”
Though the rate in which consumers upgrade their phone has slowed in recent years, the analyst notes that 38% of respondents say their device is more than three years old. He thinks Apple could benefit from a quickening upgrade cycle amid rising work-from-anywhere, or WFA, needs spurred by the pandemic.
For Apple’s Sept. 15 event—which could raise the curtain on the company’s first 5G-capable iPhones that are expected to ship in October—he predicts the company will show off an Apple Watch 6 and potentially give an update on an iPad Air.
He added that 14% of respondents indicated that 5G would make them more interested in a new iPhone, a figure he expects to grow. He also noted 40% of those that have an Apple device actively use at least three total. That speaks to the success of Apple’s ecosystem, getting users to shell out to for interacting devices, such as Macs, AirPods, Apple Watch, and Apple TV.
Apple is still trading on the high end of its historical range, at 30.8 times Power’s earnings-per-share forecast for calendar year 2021. But he says that is in line with consumer staples and strong brands.
“We believe improved visibility and potential upside to estimates driven by WFA benefits help justify a premium valuation, particularly with its next product revamp around the corner,” he wrote.
Apple stock was down 0.6% to $116.54 Thursday morning, while the
index was down slightly.
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