Wedbush seeing temporary coronavirus challenges, keeping $400 AAPL price target

Posted:
in AAPL Investors edited February 2020
While the coronavirus is having impacts on the supply chain, Wedbush is holding fast on its $400 Apple stock target price and sees Apple's iPhone growth story continuing later in 2020.

iPhone 11 and iPhone 11 Pro Max
iPhone 11 and iPhone 11 Pro Max


In a note to investors seen by AppleInsider Wedbush Securities' Daniel Ives reiterates that he is not all that concerned in the long-term about Apple's warning that it would not hit its revenue targets. While there are concerns in what Ives sees as a very important year for Apple, they remain surmountable.

"This is not any ordinary year for Cook and Cupertino as the company is entering in our opinion one of its most important iPhone upgrade product cycles ever as the drumroll for the 5G super cycle was slated to kick off in the September timeframe," writes Ives. "Our hand holding thesis since this coronavirus outbreak began is that it is primarily a timing issue for iPhone demand and ultimately once the supply chain gets back towards full capacity the Apple renaissance of iPhone growth story will resume.

Ives expects that the Apple supply chain will hit full capacity between early April and early May. At most, Ives believes that this would push back the fall 5G "iPhone 12" by a few weeks at most, with demand in China for the iPhone as a whole rebounding in the June and September quarters.

However, this could be better, says Ives. Should the supply chain recover to full by early April, there will be no delay, and no demand destruction at all. This would also result in the expected "iPhone SE 2" hitting shelves in April, instead of March.

Ives is looking at a worst case possibility, though. If the supply chain can't reach full production numbers until June, then there is the possibility of a multi-month delay for the "iPhone 5G." China demand would rebound eventually, but "demand destruction is clear throughout this key region" should this worst case scenario develop.

Ives believes that the best case and worst case scenarios are improbable, however, given that he is retaining his $400 price target for Apple stock. To reach the $400 valuation that he first guessed would happen on January 14, and established as his target on January 24, Ives takes a 9.8x multiple for Services, with that business segment worth about $585 billion, and gives the rest of Apple's hardware a 5.2x multiple, with that valued at about $1.2 trillion.

Comments

  • Reply 1 of 5
    Huge stock drop today. This is not advice for anyone, but if I had the money laying around to do so, I’d consider buying a large position soon. To be clear... I don’t have a lot of money waiting to be invested right now.  :)
  • Reply 2 of 5
    GeorgeBMacGeorgeBMac Posts: 11,421member
    It's looking like China is bringing the virus under control.  But, they are also entering probably the most dangerous public health period when they start to reopen schools, factories, shopping, travel, etc...

    But, on the other hand a few cases are beginning to pop up in other countries and nobody knows if its an ice cube or the tip of an iceberg floating along.
    Because a person can be infectious for weeks before they know that they have it, they can spread it far and wide in a short period of time.

    I haven't heard this anywhere, but it seems to me that it should be treated like healthcare workers were trained to handle HIV at its peak:  Just assume every person has it.

    Added from Reuters:
    "But China’s actions, especially in Wuhan, had probably prevented hundreds of thousands of cases, said the head of the WHO delegation in China, Bruce Aylward, urging the rest of the world to learn the lesson of acting fast.

    “The world is in your debt,” Aylward, speaking in Beijing, told the people of Wuhan. “The people of that city have gone through an extraordinary period and they’re still going through it.”


    edited February 2020
  • Reply 3 of 5
    Mike WuertheleMike Wuerthele Posts: 6,818administrator
    Huge stock drop today. This is not advice for anyone, but if I had the money laying around to do so, I’d consider buying a large position soon. To be clear... I don’t have a lot of money waiting to be invested right now.  :)
    Chicken or the egg. Apple's down about the same as the rest of the market.
  • Reply 4 of 5
    GeorgeBMacGeorgeBMac Posts: 11,421member
    Huge stock drop today. This is not advice for anyone, but if I had the money laying around to do so, I’d consider buying a large position soon. To be clear... I don’t have a lot of money waiting to be invested right now.  :)
    Chicken or the egg. Apple's down about the same as the rest of the market.

    Mostly markets have moved in sync for the past 12 years. and they dance to the beat of the same drummer:  U.S. fiscal and monetary policy.   Generally speaking they have become dependent on large volumes of cash sloshing around and, as soon as there is a hint of that cash drying up, they shrivel.  Currently, most of the effects of the tax scam have diminished so the Fed is back to pumping $60B a month of QE back into the markets.

    It has gone on for so long investors have begun to think it is normal.
  • Reply 5 of 5
    Even after 2 days of falling, the S&P still has a PE of 23.55 -- which is still way above its average of 15 or 16.
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