JMP raises Apple price target to Street-high $150 on 'exceptionally strong' demand for iPhone, iPad

Posted:
in AAPL Investors edited December 2014
Analyst Alex Gauna of JMP Securities has raised his price target for Apple from $135 to $150, predicting an "explosive" quarter for the company based on "exceptionally strong" demand seen in both China and the United States.

iPhones 2014


According to a report by Tiernan Ray of Barron's, Gauna cited strong demand for premium capacity versions of iPhone 6 and 6 Plus, as well as for iPad Air 2 and iPad mini 3.

"The iPhone 6 Plus is stocked out at all three major carriers in China," Gauna stated, "and we're seeing the longest lead times we've seen at Apple stores there, so very consistent with what we've seen in U.S. Overall, we're seeing very limited supply, with lead times still very strong."

Demand for premium high capacity iPhone 6 and 6 Plus models also "suggests average selling prices (ASPs) can be very strong for Apple, and the gross margin potential is high," Gauna added. "China Mobile subscriber adds have been accelerating, through October, and we think iPhone is a big part of that."

iPad Air 2


Gauna also noted that "90 percent or more" of Best Buy stores in major cities including Chicago, Dallas, Los Angeles and New York are stocked out of both iPad Air 2 and iPad mini 3. "We like what we've seen," Gauna stated.

Stock-outs from high demand, not limited supply

Apple has previously noted that despite its massive, diversified supply chain it has still had trouble building enough products to meet demand.

"We don't think supply is so low that it reflects limited demand," Gauna stated in the report. "Apple suppliers have said even Apple has been surprised by the strength of demand.""Apple suppliers have said even Apple has been surprised by the strength of demand"

JMP is "now modeling $67 billion in revenue for this quarter, above the company's own guidance, based in part on our industry sources," Gauna stated.

He noted that "based on the strength of demand--and we'll see some evidence of that potentially after the close today, with Avago-- the read-through is very favorable."

Avago Technologies has been a key supplier for Apple's iPhone, producing radio power amplifier chips used to connect to mobile networks. In line with Gauna's comments, the firm just reported a 118 percent jump in year over year revenues, the largest part of which is derived from the company's wireless communications sales.

Apple's competition is fading, opportunities growing

Gauna added, "what I think is also very telling is the competition continues to fade. Samsung is still seeing slippage. The September quarter numbers showed Apple had turned the tables, and gained share. That looks to continue to through the December quarter. Samsung is really the only other rival, and that also has favorable implications for [Apple's] pricing and margins."

JMP's estimated $67 billion in Apple revenues during the December quarter would indicate 16 percent year over year growth, up from the 12 percent growth Apple announced in the September quarter.

"We see Apple maintaining a mid-teens growth rate for the next couple years. We don't see the competitive landscape closing now," Gauna stated, adding that Google's Motorola-built "Nexus 6 is having some production issues of its own."

Gauna stated that "iPhone 6 and 6 Plus represent a major step forward for Apple. I think they can match that in 2015," noting that "it's very positive that China has a real 4G network going into place and demand is so strong. Once you get a full year of 4G in place with all three carriers (China Unicom and China Telecom are not even into their roll out), that's the most clear tailwind for the story."

Apple's stock reached a new all time high cents above $119 on Wednesday, then rose slightly on Friday following the Thanksgiving holiday. However, the stock fell sharply to $115 after the market opened Monday December 1, and closed today slightly below $116.

At the company's current outstanding share count of 5.87 billion, JMP's stock target would give the iPhone maker a market capitalization of over $880 billion. At $150, Gauna's target is also the most ambitious on Wall Street.

AAPL Dec 2014


Since the start of 2014, Apple shares are up 44.64 percent, compared to Microsoft's 28.51 percent gain or Google's 5.08 percent decline in nonvoting GOOG C class shares and 4.26 percent decline in standard GOOGL A class shares.

Barclays analyst Ben A. Reitzes also raised his price target for Apple today, from $120 to $140, noting that increased customer demand for larger-screened iPhones and iPads, the introduction of the Apple Watch, and the unveiling of new services like Apple Pay could significantly expand the company's margins.

Canaccord Genuity similarly raised its price target for Apple to $135 on Tuesday, noting "Apple dominated the handset industry operating profits and captured a remarkable 86% of (Q3) 2014 handset industry profits and should grow its share of industry profits during Q4 2014."
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Comments

  • Reply 1 of 32
    [B][I]Yee-sus Marta![/I][/B]
  • Reply 2 of 32
    dup
  • Reply 3 of 32
    red oakred oak Posts: 988member
    Try $170 by end of 2015. $1,200 pre-split

    Horace is right, it's 80% market psychology. But eventually the market is a weighing machine... And eventually it will catch-up
  • Reply 4 of 32
    rogifanrogifan Posts: 10,669member
    The way Wall Street deals with Apple cracks me up. At one point on Monday the stock was down almost 6% because Pacific Crest downgraded the stock. Now today it was up over 1% (when most of its tech peers were down) becauas other firms raised their price targets. At what point does Wall Street heed Jim Cramer's advice to OWN the stock NOT trade it.
  • Reply 5 of 32
    I think Samsung is the best thing that ever happened to Apple, because they have single-handedly driven the android market into low margin land. All would be android owners have shared in the terrible experience of owning a galaxy phone. And if the galaxy phone is the only phone an android owner ever tries, they will definitely find apple a breath of fresh air. I think what we're seeing is what happens when $14 billion of advertising to brainwash everyone and their grandbaby into trying a galaxy phone wear off, and we're left with the realization that we made a bad purchase… Who is going to trust Samsung commercial ever again? Samsung's big strategy was to grab as much money as fast as possible, apples strategy is to under promise and over sell. For a few years, people will fall for the gimmicky ads, and then eventually, people will start to learn… And that's what's happening now.
  • Reply 6 of 32
    mpantonempantone Posts: 1,939member
    Quote:
    Originally Posted by Rogifan View Post



    At what point does Wall Street heed Jim Cramer's advice to OWN the stock NOT trade it.



    Never. Investors are weenies.

     

    Besides, a lot of trading is now automated. If there's something that has a good chance of appreciating more than what is currently owned, the computer program will kick in, sell some of what the fund has, and buy what it calculates will do better.

     

    These algorithms are now pretty sophisticated and the market handles automation far better than when Cramer was still running a hedge fund (back in 2001).

  • Reply 7 of 32
    ifij775ifij775 Posts: 470member
    This is the iPhone everyone has been waiting for 2 years. No wonder it is selling like hot cakes.
  • Reply 8 of 32
    Originally Posted by ifij775 View Post

    This is the iPhone everyone has been waiting for 2 years.



    Nope.

  • Reply 9 of 32
    This is the iPhone everyone has been waiting for 2 years.


    Nope.

    Curious: Why do you think it's selling so well then?
  • Reply 10 of 32
    Originally Posted by anantksundaram View Post

    Curious: Why do you think it's selling so well then?

     

    Because it’s the IPHONE and it’s an admirable update. Not because of some FUDmongering BS that it “should have” been release two years ago.

  • Reply 11 of 32
    Quote:

    Originally Posted by ifij775 View Post



    This is the iPhone everyone has been waiting for 2 years. No wonder it is selling like hot cakes.

     

    I'd say the iPhone 6 would have sold like hotcakes even if it was 4". The iPhone would have sold like hotcakes at any size. Apple would always be manufacturing at full capacity and still have huge pent-up demand when a new iPhone is released.

  • Reply 12 of 32
    Quote:

    Originally Posted by ifij775 View Post



    This is the iPhone everyone has been waiting for 2 years. No wonder it is selling like hot cakes.

    so why do i still have old iphone 4 even if i can easily afford new phone? I will tell you, i do not like size and look of new Iphone, given price. If it would cost half price, then i would give it try.

  • Reply 13 of 32
    Quote:

    Originally Posted by total View Post

     

    so why do i still have old iphone 4 even if i can easily afford new phone? I will tell you, i do not like size and look of new Iphone, given price. If it would cost half price, then i would give it try.


    If you want a "small" phone, you could have gotten a 5S last year seeing as you were rocking a 3 year old phone even then.  If you want a half price iphone 6, you could wait two years then check craigslist.

     

    iphones retain their value pretty well.  Unmatched among mainstream phones actually. You wouldn't see it 70% off 6 months after release like the fire phone.

  • Reply 14 of 32
    totaltotal Posts: 83member
    Quote:

    Originally Posted by Bravadu View Post

     

    If you want a "small" phone, you could have gotten a 5S last year seeing as you were rocking a 3 year old phone even then.  If you want a half price iphone 6, you could wait two years then check craigslist.

     

    iphones retain their value pretty well.  Unmatched among mainstream phones actually. You wouldn't see it 70% off 6 months after release like the fire phone.


    yes i agree, just commented that not everyone was waiting for IP6 :) Ofcourse IP4 it outdated model, but still fine for calling, facetime, internet browsing, i do not download many apps (8,5Gb free out of 13,5Gb) and i do not play games with it so it is fine yet.

  • Reply 15 of 32
    Quote:

    Originally Posted by BestKeptSecret View Post

     

     

    I'd say the iPhone 6 would have sold like hotcakes even if it was 4". The iPhone would have sold like hotcakes at any size. Apple would always be manufacturing at full capacity and still have huge pent-up demand when a new iPhone is released.


     

    Which goes to show you the popularity of the iPhone is not about what it is and how good it is but about people wanting a device with an apple logo on it.  They could have years and years of releasing terrible products (a possible experiment) and still be successful.

  • Reply 16 of 32
    Which goes to show you the popularity of the iPhone is not about what it is and how good it is but about people wanting a device with an apple logo on it.  They could have years and years of releasing terrible products (a possible experiment) and still be successful.
    Oh look. It's the brainwashed consumer argument again. How ironic that this argument only comes from folks who are brainwashed to hate Apple so much that they will spend their hard-earned money to buy substandard garbage peddled by wannabes and proclaim it is so much better than Apple's products and ecosystem.
  • Reply 17 of 32
    analogjackanalogjack Posts: 1,073member
    Quote:

    Originally Posted by ifij775 View Post



     No wonder it is selling like hot cakes.

     

    Hotcakes don't sell this well.

  • Reply 18 of 32
    bobschlobbobschlob Posts: 1,074member

    This guy's the biggest idiot on wall st. (that's pretty big).

    My guess is, since he was unsuccessful in driving AAPL down with ridiculously low price targets, he's now seeing if he can drive it down with ridiculously high targets.

  • Reply 19 of 32
    Quote:

    Originally Posted by sog35 View Post

     

     

    Its been proven time and time again that Apple has the most educated and wealthiest customers. You really think rich/educated people are stupid?


     

    You forgot also they have the whitest customers.  Minorities don't own iPhones because they are less educated and wealthy which using your argument means they are stupid.  Not only are you an elitist but you're also a racist.  Tim Cook would not be pleased with you.

     

    Another problem with your argument is that your begging the question and assuming that the iPhone is owned by rich and educated because they are rich and educated and therefore smarter.  Can you refute the argument that rich and educated people own the iPhone because they need to fit into the status quo and any other phone, like a Samdung, would make them look lesser among their peers?

     

    If we look at stores like Wholefood Markets and other organic shops the main customer is rich and educated, but their purchases of $10 milk shows otherwise.  They are actually stupid for spending extra money on goods which are neither better for them or the environment.  There are many other areas that rich and educated people show themselves to be stupid.

     

    A case in point; do consumers line up outside an Apple store days before an iPhone release to get a great phone, or do they do it to be the first and have an opportunity to be on television and to show off to everybody around them.  The Apple employees act as cheerleaders and reinforce this thinking in the consumer's mind when they enter and leave the store with that box.  Clapping, cheering and telling them they're awesome for buying a phone.  If you want to talk worshiping; this is it.

     

    This shows that owning an iPhone is all to do with image among the majority of users.  That is not to say there are not users out there who enjoy the better experience and ecosystem of Apple but in the grand scale of things it is image that prevails.

     

    So in closing your honour, sog35 has argued that because "Apple has the most educated and wealthiest customers" the iPhone is a better product.  I have clearly demonstrated that educated and wealthy customers are not necessarily intelligent in their consumer decision making and the iPhone is just an extension of their branded clothes, shoes, watch, car, etc that help maintain their image.  Nothing more, nothing less.

  • Reply 20 of 32
    mpantonempantone Posts: 1,939member

    Actually, Apple customers top all of the customer satisfaction ratings in every single relevant survey.

     

    Now if saving money is so great, why are the people who are buying cheaper things so less satisfied?

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