There weren’t many big surprises at Apple CEO Tim Cook’s keynote on Monday at the company’s World Developers Conference, but there was enough news to keep the bulls in stocks happy.
Shares of Apple (ticker: AAPL) on Tuesday continued their march into the stratosphere. The stock has now rebounded around 60% from its March lows, a move that has raised the company’s market valuation by nearly $ 600 billion. The company is now worth about $ 1.6 billion.
Note that there are only five American companies with a total valuation of $ 600 billion or more, including Apple itself. A $ 600 billion increase is like adding the AT&T and Verizon valuation combined, and then launching, say, Nike. Or think about adding the equivalent of Disney and Netflix, plus Tesla.
In recent weeks, Wall Street analysts have been quick to update their stock price targets to hit the rising price. They offer a variety of justifications for the moves: strength in services, optimism about portable products like AirPods, anticipation of 5G iPhones, and continued momentum from aggressive stock purchases. Some simply modify their financial models to use higher price / profit multiples
But it seems to be largely reduced to a FOMO trade. Analysts don’t want to be on the wrong side of Apple’s stock, and at this point the stock shows no signs of slowing down.
The Tuesday after the presentation, the street chimed in with a series of price target increases and other widespread comments about the presentation, which looked more like a highly produced two-hour Apple infomercial than a traditional fairground direction.
Bernstein analyst Toni Sacconaghi, who has a Market Perform rating on Apple stocks, raised his target to $ 370, from $ 285. He agrees with the consensus view that the biggest update was the planned change in Intel processors (INTC) on Mac laptops and desktops. But he noted that the transition will take longer than anticipated, with some risk that buyers may delay purchases of Intel-based Macs in favor of Mac-based Macs. At ARM still to come.
Sacconaghi added in his note about the event that “what was not discussed at this year’s WWDC was possibly as interesting as what was discussed. Apple provided virtually no updated operational or financial metrics, had little to say about Apple TV + progress, chose not to comment on the current developer / regulator scrutiny on the App Store, and provided relatively marginal updates on key initiatives like health or [augmented reality]. ”
Apple is putting more pressure on underutilized services like Maps and Siri, Sacconaghi said. “We see Maps as one of the most under-monetized parts of the Apple Services ecosystem today, with significant potential for incremental ad revenue,” he wrote. Sacconaghi also noted that Apple “continues to beat the privacy drum,” noting that its position creates compensation with reduced monetization of services, “but it probably improves its stature among consumers and regulators.”
Deutsche Bank’s Jeriel Ong repeated a buy rating on Apple stock, raising its target to $ 380 from $ 350, citing a reduced cost of goods sold for Mac with the processor transitioning away from Intel chips.
“Overall, we are cautiously optimistic about the change given our previous semiconductor experience,” wrote Ong. “[Processors] They are notoriously complicated products with high barriers to entry, and while Apple certainly has a strong resume with its best-in-class processors for iPhone and iPad, the world of high-power / high-power PCs can offer different challenges. . We believe the transition to ARM at the lower end of laptops / desktops is likely to be seamless, but we look forward to more details on how far the transition for high-end products is and over what time frame. “
UBS analyst Timothy Arcuri also repeated a buy call, while raising his target price to $ 400, from $ 325. Arcuri’s note focused less on WWDC and more on good news from the iPhone front.
He argues that controls with companies in the supply chain indicate strength in June sales, with strong iPhone SE2 sales offsetting the slowdown in other models. Arcuri also noted that the supply chain expects a launch in late September for the new generation of iPhones.
“We also believe that demand for wearables should rebound strongly after Covid-19 as consumer discretionary spending shifts from leisure / retail to technology,” he writes. “Lastly, the stock has recovered significantly, but history suggests that the stock has consistently outperformed the S&P 500 within 3 months throughout the entire summer months.”
Monness Crespi Hardt’s Brian White repeated his Buy rating and $ 370 target price.
“Apple released WWDC20 with well-executed, polished virtual master address,” he wrote. “While we expect Apple to continue to be challenged in today’s economic environment, we believe that Apple’s strong bottom line, iconic brand, rapidly growing services business, portfolio of innovations, hard-line stance on personal privacy and leadership role during this crisis will allow the company to emerge from this recession stronger than it came in. In the end, we believe this COVID-19 crisis will increase user engagement and accelerate digital transformation, ultimately benefiting Apple “
Apple shares on Tuesday are up 2% to $ 366.08. That leaves them on the way for the second consecutive record close.
Write to Eric J. Savitz at [email protected]