Technology

3 Analysts Take Positive View on Apple, All for Different Reasons

Chris Lange

Published: March 22, 2016 1:45 pm

Last Updated: January 13, 2020 11:38 am

As the largest company in the world by market cap and one of the most widely traded, Apple Inc. (NASDAQ: AAPL) garners a large amount of attention from analysts. For the most part, when analysts weigh in on Apple they are generally in consensus, but not necessarily for the same reasons. However, 24/7 Wall St. has come across a few recent analyst calls that all take a positive perspective on the iPhone giant for a few different reasons.

Credit Suisse has an Outperform rating with a $140 price target, implying over 30% of upside for the stock. The brokerage firm’s reasoning behind it was that Apple just released updates to its iPhone portfolio, a new iPad Pro, additional Apple Watch bands and software updates for iOS and tvOS. The firm believes that the releases complement Apple’s solid portfolio in the compute market.

As widely expected, Apple released a four-inch iPhone SE, and Credit Suisse sees these new key features and the attractive price point of $399,as a solid move for the iPhone business for a few reasons. First, the device compares favorably with competitive products in the $300-to-$500 average selling price smartphone segment. Second, the firm sees it as additive to units, projecting about 18 million to 30 million units for iPhone SE, in calendar years 2016 and 2017, respectively.

We continue to believe that Apple looks inexpensive on a P/E ex-cash basis of 9-times in the context of material capital return, sustainable revenues, and a powerful ecosystem. We apply a ~12-times multiple and add back fully taxed net cash per share of about $15, giving upside to $140.

Merrill Lynch reiterated a Buy rating and $130 price target. This firm sees another launch aimed at transforming health care. Laying the foundation to transform care, Apple announced the launch of CareKit, which will be available in April. HealthKit, (launched in June 2014) serves as a central data collection point for a comprehensive health profile and ResearchKit (launched in March 2015) allows for wider spread and more frequently collected data for medical studies. The launch of CareKit aims to transform the way patients are monitored in between physical medical visits, marking the next step in Apple’s strategic positioning to be a leader in the evolution of health care, empowering individuals with their unique health data to improve the quality of care. Apple’s recent focus on health care is consistent with Merrill Lynch’s longer term thesis of Apple becoming a significant player in in the health care industry.

Argus reiterated a Buy rating with a $135 price target. The independent research firm believes that Apple remains attractive on priced-based comparables and discounted free cash flow valuation. Argus also sees the new iPhone 5SE as aimed at mid-tier customers in both emerging and mature economies. The 5SE contains some of the features of the iPhone 6 and 6s, but lacks certain high-end features.

The firm gave its investment thesis as follows:

[Apple] has broken with its usual iPhone launch pattern to introduce a mid-tier phone, the iPhone 5SE. The new 4-inch model replaces the iPhone 5S, while incorporating some of the features of the iPhone 6 line. Up-to-date features include Touch ID and a camera upgrade from the 5S. We believe that Apple is using this mid-tier phone to target middle class consumers in emerging economies. But the phone will also likely generate sales in mature economies from consumers who wish to join or remain in the Apple ecosystem at a reduced price.

Argus believes that the iPhone 5SE will not arrive in time or be sufficient to save the current quarter from the decline in iPhone 6s demand ahead of the expected September 2016 launch of the iPhone 7. Still, Apple generates enormous revenue even in seasonally weaker quarters, which drives cash flow and earnings growth.

Shares of Apple were trading up 0.7% at $106.69 on Tuesday, with a consensus analyst price target of $134.24 and a 52-week trading range of $92.00 to $134.54.