Mike Peterson
Apple is a solid choice for a stock to ride out the current market storm because of its resiliency, installed user base, and services outlook, according to a Wedbush analyst.
In a note to investors seen by AppleInsider, lead Wedbush analyst Daniel Ives says that Apple should be a "compelling name" for investors in the current market conditions. Those conditions include multiple compression and fears of a growth slowdown among tech giants.
Although Apple is under pressure like all Silicon Valley giants, Ives says that demand for the company's iPhone is holding up. Additionally, Apple's supply chain is looking "surprisingly resilient" despite woes in China over lockdowns and more broad component shortages.
Those supply issues could peak in the June quarter before subsiding in the September and December quarters, which are historically more important to Apple's annual revenue.
The analyst estimates that Apple has gained nearly 300 basis points in market share in China. That's important since Apple's installed base is looking to be the key to its ability to ride out the market storm.
"The stickiness of the iPhone upgrade cycle is being underestimated by investors in our opinion as we estimate that roughly 240 million of Apple's 1 billion iPhones have not been upgraded to a new smartphone in roughly 3.5 years," Ives writes.
Additionally, Services is looking strong and will likely continue its growth throughout 2022 and 2023. Ives believes the product segment remains at the center of Apple's multiple and growth story. He believes that the company's services business is worth more than $1 trillion on its own.
Ives says Apple remains his favorite tech giant. He maintains his outperform rating for the company and $200 price target, which is based on a sum-of-the-parts valuation that includes an 18x multiple on Services at $1.5 trillion and a 7x multiple on Apple's hardware at $2.1 trillion.
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6 Comments
AAPL is THE best place to invest.
I believe that Apple will surmount our national economic downturn. [How do you like your iPhone?]
Inshallah.
Be brave. Buy some AAPL while it is down a bit.
While in other news, rain is wet and the sun is bright.
It's no longer such a safe bet as it used to be.
Apple lost two of the most relevant product people (Ives, Jobs) that have been replaced with bean counters like Tim Cook. The Service business is not exactly a safe bet, with lawmakers across the globe trying to break up those all-in-one Hardware, Software, Services business companies.
I guess it's no accident, that just right now we read about leaked rumors of the new AR thingamajig that Apple is supposedly developing, but rather a strategy to keep people interested. Given that they might be in real trouble delivering orders to customers, since the supply chain finally collapses around Apple as well.
With the 'maker' generation gone from management they need to proof they can still execute on truly innovative new products.
Those almost decade long rumors on AR and Car on the other hand proof only one thing: Apple has money to waste in billions and lost it's focus on making great products. So far the best proof of that is that now senior executives are focussing on selling ads. The downwards spiral that started with App Store ads seems to continue. As proof we have a certain nonagenarian, that's so happy about Apple nowadays. Who still doesn't get that an industry, that sells disposable products with a lifespan of up to 5-10 years, can be replaced fast (ask Nokia, RIM).