Wedbush predicts $400 AAPL price on power of 5G 'iPhone 12' supercycle

Posted:
in AAPL Investors edited January 2020
Following iPhone demand checks internationally, and predictions of an incredible 5G 'iPhone 12' debut, Wedbush has set a $350 per-share price target on Apple stock, but believes that $400 is possible if everything goes right in 2020.




In a research note to investors seen by AppleInsider Wedbush analyst Daniel Ives is now the biggest bull on Apple stock price. Between AirPods, Apple's continuing shift to Services, iPhone 11 strength, and the power of the 5g "iPhone 12," Wedbush sees boom times ahead for Apple, with a 2020 year-end stock price of $400 per share, and a $2 trillion valuation by the end of 2021.

Wedbush is currently performing checks world-wide about iPhone demand, and is seeing market strength in Apple's 2019 iPhone lineup. Demand for the iPhone 11 is apparently strong, and will stay strong for some time.

"All indications are that iPhone 11 strength appears to have discernible strength both in the US and China as installed base demand continues to look healthy into the March/June quarters with the drum-roll into the highly anticipated 5G upgrade cycle in September," wrote Ives.

Additionally, that supercycle that has been expected for three years now is imminent, given the expected debut of 5G on the iPhone 12.

"We view only the first part of this massive upgrade opportunity leading to a transformational 5G 'super cycle' with 200 million to 220 million iPhone units now the new line in sand for demand based on our recent Asia supply chain checks," wrote Ives. "Coupling this dynamic with a metamorphosis-like valuation re-rating by the Street around the company's $50 billion+ annual services revenue stream is the 1-2 punch to how we ultimately see a stock in the bull case $400 valuation by year-end."

Ives sees Services itself being up to a $650 billion valuation, given what they see as approximately 925 million iPhones worldwide feeding that business. Of those 925 million, as many as 350 million are in a "window of an upgrade opportunity" and most of whom will be pushed into buying a 5G iPhone.

And, the release of the 5G iPhone is only the beginning.

"Looking out further, we believe by the end of 2021 Apple has potential to be the first $2 trillion valuation given the 5G tailwinds and services momentum potential over the coming years," said Ives.

Ives predicts that Mac and iPad revenue will remain effectively static for the next two years. At the same time, revenue from Wearables, Home and Accessories will slowly grow, continuing to outpace both the Mac and iPad regularly.

The firm has broken down valuation for Apple's biggest two markets -- iPhone plus other hardware, and Services. Ives assigns a 8.5x multiple to Services at approximately $500 billion, and the rest of Apple's iPhone plus hardware ecosystem at around $1 trillion by itself with a 4.6x multiple.

Wedbush's 12-month price target for AAPL is $350, but $400 is the bull case and could be hit by the end of 2020. Notable risks to the $350 current price target and the long-term $400 estimate are said to be price pressure forcing increasing competition, the need for iPhone growth to expand services, and further penetration of the Apple installed base. China is a "key growth driver" for Apple, and Ives believes that lower priced smartphones may be a problem, as well as return of tariffs or a re-escalation of the trade war that appears to be coming to an end, with a "Phase One" deal signing hopefully imminent.

In early pre-market trading, AAPL is up to $317.35, a 0.12% climb overnight, after a gain on Monday of 2.1%. A year ago Tuesday, Apple stock cost $150.00 per share.

Comments

  • Reply 1 of 16
    lkrupplkrupp Posts: 10,557member
    Something ain't right here. For over forty years Wall Street has trashed Apple because it didn't play by the rules. Now, all of a sudden, Apple can do no wrong? I don't buy it.
    blastdoorjony0Carnage
  • Reply 2 of 16
    FolioFolio Posts: 698member
    Guy went in Applestore to check out new watchbands and wound up with pro XDR screen. Giddy up, stock rider!
  • Reply 3 of 16
    mjtomlinmjtomlin Posts: 2,679member
    lkrupp said:
    Something ain't right here. For over forty years Wall Street has trashed Apple because it didn't play by the rules. Now, all of a sudden, Apple can do no wrong? I don't buy it.

    Installed base momentum... They’ve finally looked past quarterly sales figures (marketshare) and noticed the sea of active devices that Apple can tap into. Even if sales are flat or dip, they’re still able to continue to grow that installed base. Apple has laid the foundation (by selling billions of devices) to now grow services and accessories (wearables).
    StrangeDaysjony0pscooter63razorpit
  • Reply 4 of 16
    blastdoorblastdoor Posts: 3,378member
    lkrupp said:
    Something ain't right here. For over forty years Wall Street has trashed Apple because it didn't play by the rules. Now, all of a sudden, Apple can do no wrong? I don't buy it.
    This might be the smartest thing you’ve ever said.

    While I believe that Apple is worth more than what Wall Street has topically thought, I don’t believe that Wall Street has suddenly become smart about apple. The much more likely explanation is that Wall Street has entered into full blown bubble mentality in general, and Apple is just getting swept up.

    I for one am selling, not buying.
    muthuk_vanalingam
  • Reply 5 of 16
    And then the stock will crash after the 5G iPhones come out and sell side analysts fret over tough comps in 2021. Let’s not forget what happened after iPhone 6. Don’t get me wrong I love that the stock is doing well as I’m an investor but I fear it might be heading for a correction. In the last 6 months the stock is up over 54% and in the last year it’s up over 108%.
    Carnage
  • Reply 6 of 16
    Don’t worry. The negative spin is coming out now. Business as usual. Check your stock app news. 
  • Reply 7 of 16
    I fear it might be heading for a correction. In the last 6 months the stock is up over 54% and in the last year it’s up over 108%.
    Probably is, but, if it's just a traditional correction, we'll see a 10%-15% reduction, and then it would start to rise again. So maybe not a great time to buy, but no need to sell, either.
  • Reply 8 of 16
    And then the stock will crash after the 5G iPhones come out and sell side analysts fret over tough comps in 2021. Let’s not forget what happened after iPhone 6. Don’t get me wrong I love that the stock is doing well as I’m an investor but I fear it might be heading for a correction. In the last 6 months the stock is up over 54% and in the last year it’s up over 108%.

    why would you spoil my happiness with reason?

  • Reply 9 of 16
    BebeBebe Posts: 145member
    Even with just the current situation and observing how Apple products are out the door at my local store, there is probably truth to this.  :D
  • Reply 10 of 16
    MacProMacPro Posts: 19,778member
    Over 2$T by 2021.
  • Reply 11 of 16
    cg27cg27 Posts: 214member
    Long term investors (rather than short term speculators / interlopers) will continue to be rewarded, and will ride out the inevitable noise.

    The time to worry is if/when Warren Buffet / Berkshire pull out with their massive holdings and cause a domino effect.
    razorpit
  • Reply 12 of 16
    M68000M68000 Posts: 773member
    Does anybody really believe that 5G is going to cause a “super cycle”?  It’s fine if you do but I do not
  • Reply 13 of 16
    Carnage said:
    And then the stock will crash after the 5G iPhones come out and sell side analysts fret over tough comps in 2021. Let’s not forget what happened after iPhone 6. Don’t get me wrong I love that the stock is doing well as I’m an investor but I fear it might be heading for a correction. In the last 6 months the stock is up over 54% and in the last year it’s up over 108%.

    why would you spoil my happiness with reason?

    Sorry. :(
  • Reply 14 of 16
    apple ][apple ][ Posts: 9,233member
    Sooner or later AAPL shares will decline big time for no reason whatsoever, we've already seen this play out a few times in recent years. When panic sets in, the weak hands will jump ship like a bunch of dirty rats.

    I am prepared for it and don't care, because I will still be holding on to my shares. If it goes down low enough, I'll pick up some more shares. 

    The stock will recover again, as it has done every time in the past.
    edited January 2020 razorpit
  • Reply 15 of 16
    hentaiboyhentaiboy Posts: 1,252member
    I thought the consensus of opinion on these forums was that 5G wasn't ready for the big time yet and Apple would wait another year?
  • Reply 16 of 16
    hentaiboy said:
    I thought the consensus of opinion on these forums was that 5G wasn't ready for the big time yet and Apple would wait another year?
    Everything is fake news until it isn’t.
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