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

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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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