Apple Analysts Lift Price Targets Following 'Jaw Dropper' Q1: 4 Sell-Side Takes

Apple Inc AAPL reported better-than-expected fiscal-year first quarter results, aided by strong iPhone momentum, especially in China.

The Apple Analysts: Morgan Stanley analyst Katy Huberty maintained an Overweight rating on Apple and increased the price target from $152 to $164.

Wedbush analyst Daniel Ives maintained an Outperform rating and $175 price target. 

Raymond James analyst Chris Caso reiterated an Outperform rating and increased the price target from $150 to $160.

Needham analyst Laura Martin maintained a Buy rating and hiked the price target from $140 to $170.

Why Apple Could Be Set For Double-Digit Growth: The combination of larger installed base, fully refreshed product portfolio and continued working and learning from home trends suggest Apple is on track to report strong double-digit growth over the next several quarters, Morgan Stanley's Huberty said in a note.

The iPhone's strength, especially in China, and across-the-board Services upside contributed most of the beat, and gross margin expanded about two points, the analyst said.

Although Apple did not provide formal revenue guidance, it said it expects normal seasonal trends, suggesting revenue of about $76 billion to $78 billion, she said.

This is about $3 billion ahead of the consensus, Huberty said.

The active device installed base growth accelerated from 7% a year ago to 10% and services monetization grew at the fastest rate in several years, the analyst said.

Customer loyalty remains well north of 90% across Apple products, she said.

Morgan Stanley now estimates 2020-2025 revenue CAGR of 10%, thanks to accelerating installed base growth, improved services monetization and a recovery in China. Higher gross margins are sustainable given growing FX tailwinds and a continued mix uplift across products, Huberty said. 

"Net, we raise our forward revenue and margin estimates with FY21 EPS increasing 6% to $4.47 and FY22 EPS increasing 8% to $4.61, both materially above consensus."

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Wedbush Mulls On Apple's ‘Jaw Dropper' Q1: Revenue from the iPhone came in well above even the most bullish whisper numbers, Wedbush's Ives said in a note. 

Going by the 57% year-over-year growth in China, the reality has even exceeded the hype, the analyst said.

"iPhone 12 success out of the gates was ‘Usain Bolt-like' and is clearly on a path to meet the supercycle hype with iPhone units that could easily eclipse the previous Cupertino record from FY15 of 231 million units." 

The all-important Services business continues to fire on all cylinders and remains key to the re-rating in shares, he said. 

Raymond James Says Apple Delivered On All Fronts: Despite the late launch of iPhone 12, more revenue was delivered in the December quarter versus what is estimated for the March quarter, Caso said in a note. 

The analyst estimates that unit volume reached about 73 million, with an ASP approaching $900, the analyst said. 

The total of December plus implied March guidance is 4% above RayJay's numbers and 7% more than consensus, he said. 

Cupertino delivered on all fronts, including iPhone, Macs, wearables and Services, Caso said. 

"While Apple delivered on this cycle, we've long considered this to be a 2-year 5G cycle, with better global 5G coverage providing greater incentive for upgrades, along with what we expect to be a new form factor."

Raymond James expects services to benefit from improving unit volume, which is adding to the installed base, along with new service offerings.

Installed Base Growth Increases Needham's Optimism: Apple should be valued as an ecosystem company owing to its seamless integration of hardware, software and content, Needham analyst Martin said.

A key lead indicator to Apple's upside value are the 1 billion unique iPhone users owning 1.65 billion active devices at the end of 2020, the analyst said. 

Deeper penetration of devices per home, she said, lowers churn and raises life time value, or LTV, per user. Services adds high-margin incremental revenues to LTV, and also lower churn, Martin said. 

Subscription revenues add recurring revenues, and in the December quarter, Apple added 35 million subscribers to 620 million paid subscribers, according to Needham. 

AAPL Price Action: Apple shares were down 2.25% at $138.87 at last check Thursday. 

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Photo courtesy of Apple.