Cowen bumps AAPL to $470, says it's a 'defensive stock' for a post-coronavirus world

AppleInsider

Investment bank Cowen has raised its AAPL price target to $470 on Apple's better-than-expected June quarter results and its continuing status as a "defensive" stock.

Credit: Andrew O'Hara, AppleInsider

During the June quarter, sales of iPhones were resilient and strong Mac and iPad demand showed the "durability" of Apple's portfolio, lead analyst Krish Sankar wrote in a note to investors seen by AppleInsider. The results have set an "encouraging outlook" for Apple into 2021, based mostly on continued Services momentum and the upcoming "iPhone 12" cycle.

Apple's Q3 results were actually "well above" the highest consensus. Ahead of the earnings report, Sankar originally forecast quarterly revenue of $50.18 billion. Apple actually reported $59.7 billion in revenue.

The company's iPhone business actually managed to grow 2% year-over-year, despite declining smartphone demand. Sankar estimates that Apple shipped 35 million units in the quarter, and estimates that it'll ship 40 million in the next one.

Thanks to new work-from-home and remote education trends, both the iPad and Mac spheres showed growth in the June quarter -- up 31% and 22% year-over-year, respectively.

For Services, Apple was able to achieve a milestone of doubling 2016 sales two quarters early. Sankar notes that the "long term growth profile for the Services segment remains intact and segment gross margin reached a record 67.2%vs the LTM average of 64.5%."

On capital returns, the analyst estimates around $77 billion in buyback authorization. Apple repurchased $16 billion worth of AAPL in the June quarter.

"A diversified hardware portfolio helped AAPL weather a shift to WFH spendingwhile supporting robust FCF. Looking into CY21, a 5G iPhone cycle coupled with a growingServices business makes AAPL a defensive/growth stock to own in a (post) COVID-19 world," Sankar writes.

The analyst is bumping Cowen's 12-month AAPL price target to $470, up from $400. That's based on a 23x earnings multiple on the core business and a 35x multiple on Services, leading to a blended 28x price-to-earnings multiple on a 2021 earnings-per-share estimate of $16.83.

Shares of AAPL were trading at about $410 on the NASDAQ through most of Monday morning. Apple's stock price nearly immediately jumped 6.42% after Thursday's earnings call, eclipsing the $400 landmark.

lkrupp

For the past decade  and before Wall Street has poo-pooed Apple as one iPhone update away from oblivion. My how they’ve changed their tune. Look at all the money potential AAPL investors left on the table by taking the advice of analysts who told them to shit-can the stock as it was going nowhere.

melgross

lkrupp said:

For the past decade  and before Wall Street has poo-pooed Apple as one iPhone update away from oblivion. My how they’ve changed their tune. Look at all the money potential AAPL investors left on the table by taking the advice of analysts who told them to shit-can the stock as it was going nowhere.

The interesting thing is that Apple is moving away from being the iPhone company. The iPhone comprised 44% of sales this past quarter. Services were 25% if Mac and iPad sales keep rising, and I believe they will, I expect to see the iPhone at 30% sometime next year, which will make investors very happy (yeah, me too).

wonkothesane

Post split?

SpamSandwich

melgross said:

lkrupp said:

For the past decade  and before Wall Street has poo-pooed Apple as one iPhone update away from oblivion. My how they’ve changed their tune. Look at all the money potential AAPL investors left on the table by taking the advice of analysts who told them to shit-can the stock as it was going nowhere.

The interesting thing is that Apple is moving away from being the iPhone company. The iPhone comprised 44% of sales this past quarter. Services were 25% if Mac and iPad sales keep rising, and I believe they will, I expect to see the iPhone at 30% sometime next year, which will make investors very happy (yeah, me too).

With any luck (and good engineering) we could be looking at at least one new product line soon in the form of glasses.

razorpit

SpamSandwich said:

melgross said:

lkrupp said:

For the past decade  and before Wall Street has poo-pooed Apple as one iPhone update away from oblivion. My how they’ve changed their tune. Look at all the money potential AAPL investors left on the table by taking the advice of analysts who told them to shit-can the stock as it was going nowhere.

The interesting thing is that Apple is moving away from being the iPhone company. The iPhone comprised 44% of sales this past quarter. Services were 25% if Mac and iPad sales keep rising, and I believe they will, I expect to see the iPhone at 30% sometime next year, which will make investors very happy (yeah, me too).

With any luck (and good engineering) we could be looking at at least one new product line soon in the form of glasses.

And who knows what's around the corner with ASi? There could be convergence products that no one has even though of yet.

Glasses are going to be huge though. Maybe not as big as Apple Watch, but not far from it. Especially by the time they hit gen 2 or 3 as they've done in the past with Watch, iPhone, and iPad.

SpamSandwich

razorpit said:

SpamSandwich said:

melgross said:

lkrupp said:

For the past decade  and before Wall Street has poo-pooed Apple as one iPhone update away from oblivion. My how they’ve changed their tune. Look at all the money potential AAPL investors left on the table by taking the advice of analysts who told them to shit-can the stock as it was going nowhere.

The interesting thing is that Apple is moving away from being the iPhone company. The iPhone comprised 44% of sales this past quarter. Services were 25% if Mac and iPad sales keep rising, and I believe they will, I expect to see the iPhone at 30% sometime next year, which will make investors very happy (yeah, me too).

With any luck (and good engineering) we could be looking at at least one new product line soon in the form of glasses.

And who knows what's around the corner with ASi? There could be convergence products that no one has even though of yet.

Glasses are going to be huge though. Maybe not as big as Apple Watch, but not far from it. Especially by the time they hit gen 2 or 3 as they've done in the past with Watch, iPhone, and iPad.

Imagine Glasses providing an extra 3D layer to the function of every Apple device. iPhones & iPads could extend their screen sizes, Macs could gain palettes, floating icons, etc.

JinTech

I agree that Apple Glass (or whatever the name may be) will be a game changer. I think it goes to show that when Apple put their minds to something it really evolves to be a beautiful device over time. We have seen this with all of Apple products but notably the iPhone and Apple Watch to date.

JinTech

razorpit said:

SpamSandwich said:

melgross said:

lkrupp said:

For the past decade  and before Wall Street has poo-pooed Apple as one iPhone update away from oblivion. My how they’ve changed their tune. Look at all the money potential AAPL investors left on the table by taking the advice of analysts who told them to shit-can the stock as it was going nowhere.

The interesting thing is that Apple is moving away from being the iPhone company. The iPhone comprised 44% of sales this past quarter. Services were 25% if Mac and iPad sales keep rising, and I believe they will, I expect to see the iPhone at 30% sometime next year, which will make investors very happy (yeah, me too).

With any luck (and good engineering) we could be looking at at least one new product line soon in the form of glasses.

And who knows what's around the corner with ASi? There could be convergence products that no one has even though of yet.

Glasses are going to be huge though. Maybe not as big as Apple Watch, but not far from it. Especially by the time they hit gen 2 or 3 as they've done in the past with Watch, iPhone, and iPad.

I can see that happening.

SpamSandwich

JinTech said:

razorpit said:

SpamSandwich said:

melgross said:

lkrupp said:

For the past decade  and before Wall Street has poo-pooed Apple as one iPhone update away from oblivion. My how they’ve changed their tune. Look at all the money potential AAPL investors left on the table by taking the advice of analysts who told them to shit-can the stock as it was going nowhere.

The interesting thing is that Apple is moving away from being the iPhone company. The iPhone comprised 44% of sales this past quarter. Services were 25% if Mac and iPad sales keep rising, and I believe they will, I expect to see the iPhone at 30% sometime next year, which will make investors very happy (yeah, me too).

With any luck (and good engineering) we could be looking at at least one new product line soon in the form of glasses.

And who knows what's around the corner with ASi? There could be convergence products that no one has even though of yet.

Glasses are going to be huge though. Maybe not as big as Apple Watch, but not far from it. Especially by the time they hit gen 2 or 3 as they've done in the past with Watch, iPhone, and iPad.

I can see that happening.

Wouldn’t it be neat if you could look down at your watch and have it display a detailed 3D map of your surroundings, a floating calendar or notifications?

melgross

I’m still not sure glasses will be a major success. Google tried it remember? And we joked about it then. What’s the chance that people who don’t need glasses will want to wear these? I have worn glasses since I was 6, and it hasn’t been fun. Finally, when I got cataract surgery my vision became 20/20 except for reading distance. Believe me, I was thrilled to not to have to wear them all the time, and I could finally get sunglasses that weren’t prescriptions.

so would I want to wear these all of the time? No. Would I want to wear these most of the time? No. When? Not very often.

Marvin

SpamSandwich said:

razorpit said:

SpamSandwich said:

melgross said:

lkrupp said:

For the past decade  and before Wall Street has poo-pooed Apple as one iPhone update away from oblivion. My how they’ve changed their tune. Look at all the money potential AAPL investors left on the table by taking the advice of analysts who told them to shit-can the stock as it was going nowhere.

The interesting thing is that Apple is moving away from being the iPhone company. The iPhone comprised 44% of sales this past quarter. Services were 25% if Mac and iPad sales keep rising, and I believe they will, I expect to see the iPhone at 30% sometime next year, which will make investors very happy (yeah, me too).

With any luck (and good engineering) we could be looking at at least one new product line soon in the form of glasses.

And who knows what's around the corner with ASi? There could be convergence products that no one has even though of yet.

Glasses are going to be huge though. Maybe not as big as Apple Watch, but not far from it. Especially by the time they hit gen 2 or 3 as they've done in the past with Watch, iPhone, and iPad.

Imagine Glasses providing an extra 3D layer to the function of every Apple device. iPhones & iPads could extend their screen sizes, Macs could gain palettes, floating icons, etc.

Yes, if they can get fully opaque visuals, they can even replace the display. So a smaller iPad mini device can drive a desktop sized display:



An Apple Watch could drive the display too but it's best to have something with a large battery and processing power to drive the larger display and inputs like the Apple Pencil need the tactile surface. It could extend a flat, passive surface for tactility and to help with the opacity.

Some of the AR demos on the iPhone are really well made. Quite a few struggle to maintain the stability but Ikea's Place app is very stable and high quality:

https://apps.apple.com/us/app/ikea-place/id1279244498

That's placing full 3D objects in a scene in real-time but all it needs for computing is a flat unlit render of the computer UI and projecting it onto glasses shouldn't use nearly as much computing power as the iPhone AR because it's not doing real-time capture and superimposing. It does mean your hands are behind the UI but the user's hand movement can be tracked using a depth sensor and a digital equivalent rendered on top or the shape can be tracked and the UI masked out according to that 3D shape with a soft edge.

This is a difficult product to get right because there are a lot of important things that need to be done right but if it's treated as an accessory like the Apple Watch, people will gradually start to see the benefit and it will improve with each iteration.

The ultimate step is to put images and audio directly into the brain:

https://www.cnet.com/news/elon-musk-says-a-neuralink-update-is-coming-in-august/
https://www.roadtovr.com/gabe-newell-brain-computer-interfaces-way-closer-matrix-people-realize/
https://www.technologyreview.com/2020/02/06/844908/a-new-implant-for-blind-people-jacks-directly-into-the-brain/



Once you can feed images and audio directly to the brain, that means an end to blindness and deafness but that will need involvement from the medical field and a lot of human trials for safety. Using glasses will be the closest we get without medical intervention and it should still offer a pretty compelling use case, even being supplementary to physical displays for now.

fastasleep

SpamSandwich said:

JinTech said:

razorpit said:

SpamSandwich said:

melgross said:

lkrupp said:

For the past decade  and before Wall Street has poo-pooed Apple as one iPhone update away from oblivion. My how they’ve changed their tune. Look at all the money potential AAPL investors left on the table by taking the advice of analysts who told them to shit-can the stock as it was going nowhere.

The interesting thing is that Apple is moving away from being the iPhone company. The iPhone comprised 44% of sales this past quarter. Services were 25% if Mac and iPad sales keep rising, and I believe they will, I expect to see the iPhone at 30% sometime next year, which will make investors very happy (yeah, me too).

With any luck (and good engineering) we could be looking at at least one new product line soon in the form of glasses.

And who knows what's around the corner with ASi? There could be convergence products that no one has even though of yet.

Glasses are going to be huge though. Maybe not as big as Apple Watch, but not far from it. Especially by the time they hit gen 2 or 3 as they've done in the past with Watch, iPhone, and iPad.

I can see that happening.

Wouldn’t it be neat if you could look down at your watch and have it display a detailed 3D map of your surroundings, a floating calendar or notifications?

And why would you have to look at your watch to see any of that stuff? It's going to be right in front of you, overlaid on the real world.

fastasleep

melgross said:

I’m still not sure glasses will be a major success. Google tried it remember? And we joked about it then. What’s the chance that people who don’t need glasses will want to wear these? I have worn glasses since I was 6, and it hasn’t been fun. Finally, when I got cataract surgery my vision became 20/20 except for reading distance. Believe me, I was thrilled to not to have to wear them all the time, and I could finally get sunglasses that weren’t prescriptions.

so would I want to wear these all of the time? No. Would I want to wear these most of the time? No. When? Not very often.

 
Google Glass was nothing like these will be. Wearing corrective lenses isn't meant to be fun, and certainly not an apt comparison to this product's use case. Pretty silly to dismiss it outright based on that analogy.

melgross

fastasleep said:

melgross said:

I’m still not sure glasses will be a major success. Google tried it remember? And we joked about it then. What’s the chance that people who don’t need glasses will want to wear these? I have worn glasses since I was 6, and it hasn’t been fun. Finally, when I got cataract surgery my vision became 20/20 except for reading distance. Believe me, I was thrilled to not to have to wear them all the time, and I could finally get sunglasses that weren’t prescriptions.

so would I want to wear these all of the time? No. Would I want to wear these most of the time? No. When? Not very often.

 
Google Glass was nothing like these will be. Wearing corrective lenses isn't meant to be fun, and certainly not an apt comparison to this product's use case. Pretty silly to dismiss it outright based on that analogy.

It doesn’t matter. It’s the wearing of glasses much of the time that matters. The benefit would have to be so great that it would overcome the heavy dislike most people would have about wearing them. Just because it’s an Apple product doesn’t mean it will be a major hit.

tens of millions of people wear contacts so they font have to wear glasses. It’s going to be hard to overcome that much distaste. Sunglasses are different, and most people think that’s cool. I know a couple who wear them indoors, which isn’t cool.

we really know little about what Apple is doing. Everything we hear is rumor based on nothing more that hopeful guesses. It would have to be extraordinary.