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

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.

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.

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14 Comments

lkrupp 10521 comments · 19 Years

About 4 years ago

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 33621 comments · 20 Years

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 1738 comments · 12 Years

Post split? ;)

SpamSandwich 32917 comments · 19 Years

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 1793 comments · 17 Years

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.