JP Morgan initiates coverage of AAPL with $272 target, lauds underrated services biz

Posted:
in AAPL Investors edited September 2018
Investment bank JP Morgan on Thursday initiated coverage on shares of Apple with an "Overweight" rating and $272 price target, saying it sees "considerable upside" for the company based on its leadership position in the smartphone market and the services it uses to amplify those revenues.

Two iPhone XS


"While Apple's leadership position in the premium smartphone market is well understood by investors, we still see considerable upside to the stock from current levels," analyst Samik Chatterjee wrote in an inaugural research note seen by AppleInsider.

Chatterjee joined a chorus of other analysts in praising Apple's transition into a services-based business, along with rising iPhone ASPs (average selling prices), and continued innovation. He also lauded the company for its recent stock buybacks and strong balance sheet, which the analyst sees Apple using for "outsized share repurchases or M&A."

Chatterjee, like Gene Munster and several other analysts, believes services as key for Apple in the future and that concerns about iPhone volumes have driven investors to "overlook the robust growth in the installed base."

"We believe the transformation to services, led by growth in both installed devices and service revenue per device, is tracking better than investor expectation, including achieving revenue target of $48 billion by FY20E ahead of schedule," the analyst wrote. "The Services opportunity is currently derived primarily from App Store purchases and there are multiple emerging drivers, such as Apple Music and Apple Pay, which should continue to drive strong growth."

In his note, Chatterjee also predicted that Apple will soon offer an "all-encompassing Media subscription," which will include its video offerings along with newspaper and magazine content, for a price point of around $14.99.

"We expect Apple to combine the video and print media offering (through acquisition of Texture) to offer a packaged subscription at $14.99/month relative to $9.99 for Apple Music and drive Apple Music subscribers to upgrade to the packaged subscription, while at the same time growing the subscriber base at a rapid pace," he wrote. "We estimate Apple's incremental media offerings beyond Music to drive an incremental $2.8 billion of revenues by 2025."

Shares of AAPL rose to a new all time high Thursday during inter-day trading and are currently trading up $5.36, or 2.43%, to $225.79 on the NASDAQ stock exchange.

Comments

  • Reply 1 of 12
    lkrupplkrupp Posts: 6,782member
    The critics keep waiting for Apple to fizzle because of smartphone market saturation and commoditization. That doesn’t seem to be happening with Apple yet, or anywhere near happening.
  • Reply 2 of 12
    wood1208wood1208 Posts: 1,866member
    Based on prior experience being wrong, only foolishly brave will downgrade Apple. Most will keep raising AAPL until doesn't work.
    SpamSandwich
  • Reply 3 of 12
    lmaclmac Posts: 177member
    They certainly aren't making as much money on computers as they could be, with all of the focus going to phones.

  • Reply 4 of 12
    Wonder what the stock target would be if AAPL announced they are making media content that includes gratuitous nudity and violence. You know...like every other studio. Good money in that.

    And I don't see the word "tariffs" anywhere in this article or analysis. 
  • Reply 5 of 12
    Totally random post (and apologies for being off-topic), but there is an Apple connection: Is that Bromwich, next to Ford?
  • Reply 6 of 12
    eightzero said:
    Wonder what the stock target would be if AAPL announced they are making media content that includes gratuitous nudity and violence. You know...like every other studio. Good money in that.

    And I don't see the word "tariffs" anywhere in this article or analysis. 
    Apple has special exclusion from tariffs for now. Remember, both the US and China receive massive benefits from investors (on the US side) and employment (on the China side), so neither country is eager to punish them.
    edited September 2018
  • Reply 7 of 12
    lmac said:
    They certainly aren't making as much money on computers as they could be, with all of the focus going to phones.

    Oh please stop. Your knee jerk reaction isn’t fact. 
    Mojave has just been released, iMac Pro and MacBook pros have all been released within the last year, we are expecting that the Mac Pro will be announced sometime in 2019. 
  • Reply 8 of 12
    chasmchasm Posts: 1,263member
    lmac said:
    They certainly aren't making as much money on computers as they could be, with all of the focus going to phones.

    Actually, they are the most profitable computer maker on earth.
  • Reply 9 of 12
    lmac said:
    They certainly aren't making as much money on computers as they could be, with all of the focus going to phones.


    Since when is the iPhone not a computer?
  • Reply 10 of 12
    I think they are right-

    It is easy to imagine a 1.35T market cap using even Wall Street’s confused metrics—

    250B annual hardware sales x 4 = 1T

    plus

    50B (services, growing at 30% clip) x 7 = 350B

    so AAPL maybe 1.350T soon.

    which puts it at $275-280ish.
  • Reply 11 of 12
    as a humorous aside, I know someone who just got back from vacation from Mexico.  Her husband left his Samsung unattended in full view for over an hour and it was not stolen.

    So some computers are better than others
  • Reply 12 of 12
    lmac said:
    They certainly aren't making as much money on computers as they could be, with all of the focus going to phones.


    Since when is the iPhone not a computer?


    "Today we're introducing three revolutionary products... The first one is a widescreen iPod with touch controls. The second is a revolutionary mobile phone...and the third is a breakthrough Internet communications device. So three things: a widescreen iPod with touch controls, a revolutionary mobile phone and a breakthrough internet communications device... An iPod, a phone and an Internet communicator. An iPod, a phone -- are you getting it?"

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