Atlantic Equities analyst James Cordwell downgraded Apple (AAPL) to Underweight, a sell-equivalent rating, saying the stock’s 50% relative outperformance over the last 12 months has been driven "entirely" by multiple expansion. Seeing the 5G iPhone cycle more than priced in and limited upside from Services and Wearables, the analyst argued that the iPhone 11 cycle could still disappoint. Bullish on the stock and not seeing "all the good news" baked into Apple shares, his peer at Wedbush told investors that Apple can hit $400 in 2020 and be the first $2T valuation given the 5G tailwinds and service momentum potential over the coming years.
SELL APPLE: Atlantic Equities' Cordwell downgraded Apple to Underweight from Neutral and lowered his price target on the shares to $275 from $235, telling investors that the stock's 50% relative outperformance over the last 12 months has been driven "entirely" by multiple expansion. The recent run has been driven by growing optimism for the 5G iPhone cycle, ongoing strength of Services and Wearables and apparent robust iPhone 11 demand, he noted. However, the analyst believes upside potential from the 5G iPhone cycle is now more than fully priced in, Services and Wearables are unlikely to be a source of material upside and iPhone 11 average selling price pressure could result in revenue disappointing, leaving risks now skewed to the downside.
APPLE COULD BE WORTH $2T BY END OF 2021: In a research note of his own, Wedbush analyst Daniel Ives told investors that his channel checks over the last week around iPhone 11 units heading into the March quarter "look robust." When coupled with "jaw dropping" AirPods momentum, Apple should post "clear upside" in the upcoming December quarter with "strong" March guidance on January 28. Moreover, the analyst does not believe "all the good news" is baked into Apple shares after the recent rally. Apple is only in the first part of a "massive upgrade opportunity," leading to a transformational 5G "super cycle" with 200M to 220M iPhone units "now the new line in sand for demand" based on his recent Asia supply chain checks, he contended.
This dynamic, alongside a "metamorphosis-like valuation re-rating" by the Street around the company's $50B-plus annual services revenue stream, can bring the stock to a "bull case" $400 valuation by year-end, Ives argued. Looking out further, the analyst believes that by the end of 2021 Apple has potential to be the first $2T valuation given the 5G tailwinds and services momentum potential over the coming years. He maintained an Outperform rating on Apple with a $350 price target, as he continues to view the company as the best 5G play into the next year.
Also keeping a Buy rating on Apple, UBS analyst Tim Arcuri raised his price target on the shares to $355 from $280 after the recent outperformance of the stock and in anticipation of a strong 5G upgrade cycle. The analyst noted that his Asia supply chain analysis supports his expectations of four new iPhone models being launched this year, while the latest smartphone survey data reflect 22% of responders indicate that 5G will be a factor in their decision to upgrade.
PRICE ACTION: In late morning trading, shares of Apple are lower by 0.5% to $315.37.
"Street Fight" is The Fly's recurring series of exclusive stories that highlight a stock or sector that is in focus amid divergent views from Wall Street analysts.
Apple
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