2:08 PM, Sep 30, 2019 — Apple (AAPL) on Monday landed a price-target upgrade at J.P. Morgan, with the investment firm seeing the potential of a 21% price gain as it lifts its iPhone volume forecasts for this year and 2020.
The firm set a December 2020 price target of $265 per share, up from its December 2019 forecast of $243 per share. On Monday, shares gained more than 2% during the session to trade around $224.
The December 2020 price target is “based on a 17.0x P/E multiple on our C2021 EPS estimate of $15.65,” said J.P. Morgan analysts led by Samik Chattarjee in a note to clients.
J.P. Morgan raised its iPhone volume expectations for fiscal Q4 by 1 million units, and by 3 million units for fiscal Q1 2020 ending in December as it accounts for “stronger trends” led particularly by the new iPhone 11 model.
“Given investor expectations were largely set for a muted product cycle in 2019 with limited h/w [hardware] upgrades and replacement cycle risks from expectations for 5G enabled iPhones in 2020,” the analysts wrote, “we believe the volume upside in 2019 will have significance in demonstrating that the firm can deliver balance of volume and profitability even in a tough backdrop.”
The investment firm lifted its expectations for Apple’s 2020 product cycle, driven by its expectation that the tech behemoth will add one new iPhone model in during the first half of the 2020 calendar year, followed by three 5G enabled iPhones in September 2020. Apple should have volumes of 198 million units in calendar year 2020, and 200 million units in calendar year 2021, the firm said.
“We expect solid consumer interest in 5G phones at the premium end of the North American market, and Apple is well-positioned to drive an outsized share with its 2020 product cycle,” wrote J.P. Morgan.
The firm did add that its forecasts for reported revenue and earnings “do not demonstrate much upside despite the volume upside, led primarily by the impact of adverse FX, as well as more modest pricing and gross margin expectations on the stronger demand for the lower-end iPhone 11, and stronger momentum in legacy iPhone sales.”
Companies: Apple Inc.
Price: 224.01 Price Change: +5.19 Percent Change: +2.37