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

In a note to investors seen by 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.

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