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RBC ups Apple price target to $110 in anticipation of 'busy fall' for iPhone & 'iWatch'

post #1 of 18
Thread Starter 
Following Apple's record earnings report this week, investment firm RBC Capital Markets raised its price target to $110, recommending that investors buy ahead of what is expected to be a "busy fall" for the iPhone maker.




Analyst Amit Daryanani issued a note to investors on Wednesday, a copy of which was provided to AppleInsider. In it, he has maintained his firm's "outperform" rating, and raised the target on AAPL stock from $100 to $110.

With $164 billion in cash amounting to a whopping $22 per share, Daryanani believes shares of Apple are undervalued at their current levels. And in terms of its product lineup, he sees continued growth opportunities in both the tablet and smartphone spaces.

Along with his new current target of $110, Daryanani has an "upside scenario" for Apple of $125 per share. He could see the company reaching that level if Apple were able to penetrate the low-end smartphone market while maintaining margins at or above the 40 percent level.

At its current sub-$100 price, Daryanani believes shares of Apple are at an attractive entry point for investors to benefit from the company's ability to sustain revenue and earnings-per-share growth through fiscal year 2015.

Among the catalysts he sees for Apple moving forward are ramp-up in availability of an anticipated "iPhone 6," new iPad models this fall, the potential for major new product lines such as a so-called "iWatch," and improvements in the company's capital allocation policy.

"We believe AAPL has multiple levers ahead of it that will drive further revenue acceleration," he wrote. "Notably, we believe emerging market penetration will remain a key and material revenue driver for the company over the next several years."

RBC joins a number of investment firms that have increased their price target on AAPL in recent weeks ahead of the lucrative fall shopping season. Other firms include UBS ($115), Barclays ($110), Evercore ($115), Morgan Stanley ($110), J.P. Morgan ($108), and Needham ($97).
post #2 of 18
Amit Daryanani? What happened to their old guy? Fired?

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #3 of 18

My target is $110 EOY

$125 by Feb2015

 

I have been much more accurate then these clowns

 

When the stock was $400 last year my target was:

$82 EOY

$100 July2014

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post #4 of 18
Quote:

Originally Posted by sog35 View Post
 

I have been much more accurate then these clowns

 

 

Prove it. I want to see scanned and notarized copies of emails, with timestamps. 

 

On a related note, I correctly predicted the closing price of AAPL stock correctly for the last 17 years. 100%. Trust me, it's true. 

post #5 of 18
Venture Beat claims Apple is working on a range of smart watches with Swatch.

http://venturebeat.com/2014/07/23/apple-is-working-with-swatch-others-on-a-family-of-smartwatches/
post #6 of 18
Quote:
Originally Posted by macinthe408 View Post
 

 

Prove it. I want to see scanned and notarized copies of emails, with timestamps. 

 

On a related note, I correctly predicted the closing price of AAPL stock correctly for the last 17 years. 100%. Trust me, it's true. 

 

look at my post history

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post #7 of 18
Quote:
Originally Posted by sog35 View Post
 

My target is $110 EOY

$125 by Feb2015

 

I have been much more accurate then these clowns

 

When the stock was $400 last year my target was:

$82 EOY

$100 July2014

 

 

I tend to agree with the exception of the upper end could reach $150-$200. 

 

Reason: iWatch

 

This is the only product that Apple will make that people may want to own more than one (possibly the iPod being the exception). People who are into time pieces may own several. Casual, evening out, gifts, etc. 

 

Apple has endless reason to release new watches outside the technology cycle. Having the iOS tech the same, Apple can create watches with many, many different faces and mechanics. Such as the Kairos

 

Events: 

Father's day

Mother's day

Graduation

Birthday

Christmas (or your holiday of choice)

Anniversary

Ive Signature Addition (micro signed by Sir Ive himself)

Retirement 

 

 

Materials: each with a number of leather/metal band combinations. 

Aluminum 

Titanium 

Liquidmetal 

Platinum 

 

Don't forget a number of diamond combinations! 

 

I bet you could add several to the event list yourself. These event watches can be released to be timed (yes) with their event, and just during the year. Technology releases as normal schedule allows. 

 

No other product that Apple has released gives them this flexibility and ability to sell multiple devices to the same person. They can release a new watch face every quarter for the next 10 years and not run out of ideas. 

 

[fanboy out of breath from excitement, must go rest....] 


Edited by Richard Getz - 7/23/14 at 3:19pm
post #8 of 18
Oh yes Apple will definitely be looking to expand into the bottom end crapware market. /s
Quote:
Originally Posted by sog35 View Post

look at my post history

Touché.
post #9 of 18
Quote:
Originally Posted by macinthe408 View Post

 

On a related note, I correctly predicted the closing price of AAPL stock correctly for the last 17 years. 100%. Trust me, it's true. 

Prove it. I want to see scanned and notarized copies of emails, with timestamps. 

post #10 of 18
Quote:
Originally Posted by sog35 View Post

My target is $110 EOY
$125 by Feb2015

How do you plan to meet these targets - late nights, early mornings, skipping lunch, lots of meetings? The problem with setting targets for other people is you have no control over anything relating to them meeting those expectations.

Apple's been helping drive the stock price up and there's more of that activity to come:

http://www.fool.com/investing/general/2014/07/21/how-much-stock-did-apple-inc-repurchase-last-quart.aspx

$125 by Feb 2015 would need them to buyback $130-168b worth of shares, they only make ~$7-13b per quarter net income and there's only 2 more quarters before Feb 2015. Their goal isn't solely to keep the stock price high, they have other things they need to use the cash for.

The iPhone 6 will likely be a big hit but it remains to be seen if unit volume growth will result in significant profit growth. It's great if they do grow profits and unit volume and everything goes up but with the split price, I think people are getting more carried away with valuations than before. When it was around $600, a $50 increase seemed feasible and now people look at and still think $50 but that's now a 7x higher increase. A $25 jump now is equivalent to $175. It's not totally unrealistic but it seems a bit impetuous to expect that kind of jump so soon. All that happens if they hit that is some people will want it higher still. Sooner or later, people will have to be content with a valuation because it simply won't keep going up.

The iPhone 5 grew revenue and unit volume significantly but profit was flat. They had 29% unit growth vs the 4S but the same net income. If they replicated that unit volume growth, they'd top 61m units but again, net income could grow much less than that if margins are squeezed due to higher cost components. I think if they can convince irrational traders to maintain their fictional company valuation around $100-105, that would be just fine.
post #11 of 18
Quote:
Originally Posted by Marvin View Post


$125 by Feb 2015 would need them to buyback $130-168b worth of shares, they only make ~$7-13b per quarter net income and there's only 2 more quarters before Feb 2015. Their goal isn't solely to keep the stock price high, they have other things they need to use the cash for.

The iPhone 6 will likely be a big hit but it remains to be seen if unit volume growth will result in significant profit growth. It's great if they do grow profits and unit volume and everything goes up but with the split price, I think people are getting more carried away with valuations than before. When it was around $600, a $50 increase seemed feasible and now people look at and still think $50 but that's now a 7x higher increase. A $25 jump now is equivalent to $175. It's not totally unrealistic but it seems a bit impetuous to expect that kind of jump so soon. All that happens if they hit that is some people will want it higher still. Sooner or later, people will have to be content with a valuation because it simply won't keep going up.

The iPhone 5 grew revenue and unit volume significantly but profit was flat. They had 29% unit growth vs the 4S but the same net income. If they replicated that unit volume growth, they'd top 61m units but again, net income could grow much less than that if margins are squeezed due to higher cost components. I think if they can convince irrational traders to maintain their fictional company valuation around $100-105, that would be just fine.

 

Simple math.  That's how.

 

FY 2014 EPS

Q1 - EPS $2.07

Q2 - $1.66

Q3 - $1.28

Estimated Q4 - $1.41 (assuiming 20% growth from FY2013 Q4)

 

Total FY 2014 EPS = $6.42

 

Last quarter Apple showed 20% profit growth during their SLOWEST quarter of the year.  I'm assuming we see 20% profit growth in FY2015.  This is very conservative, especially since Apple can buyback another 8% of its shares with $40B left in the buyback.

 

FY 2014 EPS x 20% growth = FY 2015 EPS

$6.42 x 1.20 = $7.70

 

Apple's current PE ratio is 16.3

$7.70 x 16.3 = $125.51 target price

 

I can also argue that the PE ratio will be higher with the release of new products like the iWatch.

I can also argue that EPS will grow more than 20% with the mother of all upgrades - iPhone6

But in this case I won't.  All that  has to happen is:

 

1. Apple grow earnings 20% (which they just did in their WEAKEST quarter)

2. Maintain the same PE ratio of 16.3

 

 

 

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post #12 of 18
The USA still hasn't been able to update to smart cards ( see wikipedia : http://en.wikipedia.org/wiki/Credit_card#cite_note-69 ). I strongly doubt that Apple will revolutionize the situation. Payment systems involve companies, expenses, and risks, which make them extremely reticent to change beasts. Hell, I've seen places where they run payment systems on Windows 95 because _it works_.

As cool as the idea sounds, I believe, and I might be totally wrong, that nothing earth-shattering is going to come from this.

Social Capitalist, dreamer and wise enough to know I'm never going to grow up anyway... so not trying anymore.

 

http://m.ign.com/articles/2014/07/16/7-high-school-girls-are-kickstarting-their-awa...

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Social Capitalist, dreamer and wise enough to know I'm never going to grow up anyway... so not trying anymore.

 

http://m.ign.com/articles/2014/07/16/7-high-school-girls-are-kickstarting-their-awa...

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post #13 of 18
Quote:
Originally Posted by sog35 View Post

Last quarter Apple showed 20% profit growth during their SLOWEST quarter of the year.

They showed 20% EPS growth, their profit growth was $7.7b vs $6.9b = 11.6%. The EPS growth is higher because they were buying back shares.
Quote:
Originally Posted by sog35 View Post

I'm assuming we see 20% profit growth in FY2015.  This is very conservative, especially since Apple can buyback another 8% of its shares with $40B left in the buyback.

They have made a commitment of a $90b buyback before December this year of which $51b has been made so that will indeed help drive the share price up around 8%, though likely not immediately. To reach $125, they'd need to show income growth on top of that of about 20%. In other words, just over 60m iPhones at the same margins, which is perfectly reasonable.

But this is assuming that the present company share price is not already high and the margins don't fall due to more expensive components. The present share price might be at this level because people who are buying shares now are anticipating earnings growth so the biggest impact will be from the share buyback.
post #14 of 18
Quote:
Originally Posted by Marvin View Post


They showed 20% EPS growth, their profit growth was $7.7b vs $6.9b = 11.6%. The EPS growth is higher because they were buying back shares.
They have made a commitment of a $90b buyback before December this year of which $51b has been made so that will indeed help drive the share price up around 8%, though likely not immediately. To reach $125, they'd need to show income growth on top of that of about 20%. In other words, just over 60m iPhones at the same margins, which is perfectly reasonable.

But this is assuming that the present company share price is not already high and the margins don't fall due to more expensive components. The present share price might be at this level because people who are buying shares now are anticipating earnings growth so the biggest impact will be from the share buyback.

 

You are correct.  I meant 20% EPS growth.

 

With 20% EPS growth and the same 16.3 PE = $125 after Jan earnings

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post #15 of 18
Quote:
Originally Posted by lightknight View Post

The USA still hasn't been able to update to smart cards ( see wikipedia : http://en.wikipedia.org/wiki/Credit_card#cite_note-69 ). I strongly doubt that Apple will revolutionize the situation. Payment systems involve companies, expenses, and risks, which make them extremely reticent to change beasts. Hell, I've seen places where they run payment systems on Windows 95 because _it works_.

As cool as the idea sounds, I believe, and I might be totally wrong, that nothing earth-shattering is going to come from this.

 

They said the same things about AT&T, Verizon, Sprint before the iPhone.

 

When they see the $ they will comply.

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post #16 of 18
Quote:
Originally Posted by Chris_CA View Post

Quote:
Originally Posted by macinthe408 View Post

On a related note, I correctly predicted the closing price of AAPL stock correctly for the last 17 years. 100%. Trust me, it's true. 
Prove it. I want to see scanned and notarized copies of emails, with timestamps. 

I think he might have been pulling your leg.
"If the young are not initiated into the village, they will burn it down just to feel its warmth."
- African proverb
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"If the young are not initiated into the village, they will burn it down just to feel its warmth."
- African proverb
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post #17 of 18
These analysts are all a bunch of roguish, triple-visaged, baggages!
"If the young are not initiated into the village, they will burn it down just to feel its warmth."
- African proverb
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"If the young are not initiated into the village, they will burn it down just to feel its warmth."
- African proverb
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post #18 of 18
Quote:
Originally Posted by Chris_CA View Post
 

Prove it. I want to see scanned and notarized copies of emails, with timestamps. 

 

Perhaps his hard drive crashed, with zero backups :P 

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