Apple seems well positioned to drive higher confidence as an "earnings compounder," according to JP Morgan, which has raised its price target to $235 for the end of 2024.
iPhone 14 Plus
JP Morgan continues to remain bullish about Apple's future, having previously cited a "robust shareholder return" for 2023. Despite global economic headwinds and other factors, Apple remained resilient through the March quarter and expects to show strength in the upcoming third-quarter report.
According to a note from JP Morgan seen by AppleInsider, Apple will continue to lead with its Services growth and resilience in hardware replacement cycles. They refer to Apple as an "earnings compounder" with diversified drivers that hail back to early 2023.
Reasons for the higher price target
- Apple is a resilient earnings compounder rather than a product cycle company. Diversified revenue drivers within the hardware and a natural diversification of the replacement cycle.
- Proof of resilience driving the re-rating. Limited revenue downsides in rough years show the strength of a large install base.
- Cycling back into revenue growth starting in F4Q23 (September-end) even as macro remains challenged. Apple is positioned to drive robust growth when macro is normal.
- F4Q23 (September-end) Guidance: Outlook to reflect modestly better seasonal drivers at $91.9 billion ahead of $90.5 billion consensus.
- F3Q23 (June-end) Forecast: Expect a modest beat to guidance at $81.9 billion of revenue and EPS of $1.23.
Apple's price performance. Image source: JP Morgan
Risks to JP Morgan's rating and price target
- The smartphone market could contract faster than expected.
- Competition in markets like China and India could increase pressure and reduce performance.
- Management could be distracted by investments in new business strategies and acquisitions that prove fruitless.
- A departure of CEO Tim Cook could present a modest risk to share price as execution on strategic priorities under Cook shift.
JP Morgan sets Apple as an overweight rating and increases its price target from $190 in December 2023 to $235 in December 2024. As stated above, this is based on Apple's diversified revenue and resilience despite global economic challenges.