JP Morgan raises Apple price target to $175, forecasts earnings beats through 2021

AppleInsider

JP Morgan has raised its Apple price target to $175 because of an uptick in iPhone 12 build estimates and the continued sales strength of the company's Mac lineup.

Credit: Andrew O'Hara, AppleInsider

AppleInsider, analyst Samik Chatterjee says that the iPhone and Mac data leads to an increase in near-term forecasts. However, he says Apple's momentum, led by better market share, also drives a higher sustainable volume in future quarters.

Chatterjee says the data leads JP Morgan to believe that Apple will outperform investor expectations over a longer time horizon, instead of just the upcoming earnings report.

On the iPhone side, JP Morgan supply chain analysts have raised their iPhone build forecast for 2021 by 9 million units. That's because of "resilient demand" for current and legacy models, even as the build forecast for the upcoming "iPhone 13" remains robust.

"The combination of upside from iPhone 13, stemming from a better upgrade rate to 5G devices and a larger installed base, as well as upside from the launch of iPhone SE3 in calendar 2022 could set Apple up for an earnings upgrade cycle over the next 6-12 months," Chatterjee writes.

Additionally, the analyst cites a recent Wave7 research report indicating that Apple isn't seeing a major impact from current industry supply constraints. Apple's primary competitors are facing much harsher headwinds in terms of chip and component shortages.

Mac growth also remains solid, despite the easing of coronavirus restrictions and an increase in vaccination rates in many parts of the world. Recent PC shipment estimates suggest that Mac growth in the third quarter could be between 9% and 20% year-over-year.

"As highlighted in our last week's report, we see Apple shares positioned for upside led by upward revisions to iPhone 12 volumes on the back of recent momentum and share gains in key geographies, including China, as well as upside to investor expectations for the upcoming iPhone 13 for which investor expectations remain low. Further, with the launch of iPhone SE3 in 2022, Apple has the opportunity to not only pleasantly surprise with a more robust iPhone 13 cycle, but also has the opportunity to drive material upside to consensus expectations for FY22."

Chatterjee has raised his 12-month Apple price target to $175, up from $170. The new target is based on a price-to-earnings multiple of about 30x on the bank's 2022 earnings estimate of $5.75, up from $5.66. The analyst also sees another 20% upside in Apple shares through the end of 2021.

Keep up with everything Apple in the weekly AppleInsider Podcast -- and get a fast news update from AppleInsider Daily. Just say, "Hey, Siri," to your HomePod mini and ask for these podcasts, and our latest HomeKit Insider episode too.If you want an ad-free main AppleInsider Podcast experience, you can support the AppleInsider podcast by subscribing for $5 per month through Apple's Podcasts app, or via Patreon if you prefer any other podcast player.

GeorgeBMac

I chuckle as the stock traders try to normalize what's going on.

Meanwhile Jerome Powell has more to say about Apple's price than Tim Cook does -- and he's been announcing that all year:   "Buy & Hold" - at least through the rest of the year -- the next quarter minimum -- till he decides to bring PE ratios back down to the stratosphere.   The last time I looked, real interest rates were grossly negative, he was printing $120+Billion a month, and the PE ratio of the S&P was about triple its historical average.

crowley

I set my own price alert at $150 back in March, thinking it's be unlikely to hit it this year, and if it did a crash/correction may well follow.  But now we're nearly there, I'm very unsure.

ArchStanton

crowley said:

I set my own price alert at $150 back in March, thinking it's be unlikely to hit it this year, and if it did a crash/correction may well follow.  But now we're nearly there, I'm very unsure.

Just .44 cents away about 30 minutes ago. Either it’s time for ya to take profit or reset expectation to 160 😀

byronl

it would be nice if you guys stated the market cap apple would have with that price  

Hunter13

It’s okay, you can thank me for this. I sold my share years ago right before Warren Buffet decided to invest. 

If I with have held onto my shares, the stock never would have gone up haha

davidw

byronl said:

it would be nice if you guys stated the market cap apple would have with that price  

According to Yahoo financial 

There are 16.7B AAPL shares outstanding. So with todays closing price of $149.15 Apple market cap stands at about $2.5T

With a closing price of $175, Apple would have a market cap of about $2.9T  (16.7 x $175)

But that's only if Apple don't buy back any shares until then. Which is highly unlikely (that they won't be). Plus the 16.7B share outstanding might not be accurate, as it might not reflect any shares Apple bought back during the last quarter (2nd Quarter of 2021). We won't get an update to that number until earnings on July 27. 

In the first Quarter of 2021 alone, Apple repurchased $18B with of AAPL. If we assume at an average price of $130 per share, that comes to about 140M shares.  

Here's a chart showing how much Apple has spent buying back shares, by the quarter. 

https://ycharts.com/companies/AAPL/stock_buyback

Forbes reported that in about the last 3 years, Apple has purchased back 9.5B shares (split adjusted). 

https://www.forbes.com/sites/chuckjones/2021/02/28/apple-will-have-to-buyback-250-billion-in-stock-to-become-cash-neutral/?sh=124bbd607d7d

That $3T market cap is a moving target and won't be easy to predict when it will happen, unless AAPL shoots up to $175, right after earnings.