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Apple: Healthy Demand Merits a Price Target Hike, According to this Analyst
Stock Analysis & Ideas

Apple: Healthy Demand Merits a Price Target Hike, According to this Analyst

2022 has kicked off marked by uncertainty everywhere. Continuing 2021’s worrying themes – covid, inflation and supply chain bottlenecks are all still hogging the headlines.

Against this backdrop – specifically the current inflationary environment – Deutsche Bank’s Sidney Ho thinks investors will flee to quality. And where better to turn to than the world’s largest company by market cap – Apple (AAPL).

In fact, considering the “healthy demand and strong product portfolio,” the 5-star analyst thinks the Street is being overly conservative with its revenue outlook for the tech giant. Wall Street is factoring in revenue growth of just +5% in CY22. But with some revenue from CY21 being pushed out and “already accounting for ~3 ppts of growth,” Ho says this is too low, expecting 9% growth. Therefore, the analyst believes there is an “upward bias to estimates as we go through the year.”

However, Ho also thinks it is not only the Street taking the cautious route. “AAPL guidance for F1Q assumes more than $6b of revenue impact from supply chain shortages, but we believe this estimate is overly conservative as our recent checks suggest order lead times have significantly shortened for most AAPL’s products with the exception of a few SKUs (e.g. iPad and MacBook Pro),” the analyst explained.  

What this implies, according to Ho, is that the company has been successfully through the supply chain bottlenecks. This improvement could drive “some upside in F1Q,” but the company should really reap the rewards in F2Q, when supply “catches up to demand.”

And as Ho notes above, demand is looking pretty “robust,” especially for the iPhone 13. Checks with semiconductor suppliers indicate that in the first two quarters following the launch, “aggregate demand for iPhone 13 is expected to exceed that for iPhone 12.” This suggests to Ho that the company’s revenue might be “delayed but not destroyed.”

So, down to business, what does it all mean for investors? Ho reiterated a Buy rating although the price target gets a bump; the figure rises from $175 to $200, implying shares have room for ~22% growth over the coming months. (To watch Ho’s track record, click here)

The rest of the Street has no bones to pick with the Deutsche Bank analyst’s assessment. AAPL’s Strong Buy consensus rating is based on 22 Buys vs. 4 Holds and lone Sell. With an average price target of $181 and a change, investors stand to take home about 11% gain, should the target be met over the next 12 months. (See Apple stock forecast on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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