Everything is in the eye of the beholder and looking at the current outlook for Apple (AAPL), the conversation on Wall Street has revolved around the supply chain issues, and how they affected sales in the holiday quarter. That’s one way to look at it, but Wedbush’s Daniel Ives says there’s a more constructive story taking place, one where “robust consumer demand” is driving the narrative for the iPhone 13 heading into 2022.
“Based on our supply chain checks over the last few weeks,” said the 5-star analyst, “We believe demand is outstripping supply for Apple by roughly 12 million units in the December quarter which now will add to the tailwinds for Apple in the March and June quarters as the supply chain issues ease in 1H22.”
Despite the chip shortage headwinds, going by Ives’ checks, Apple sold more than 40 million iPhones during the holiday season, amounting to a record number of sales. One “major source of strength” deserving of credit here is China, where over the last 12 months the analyst estimates Apple’s market share in this “key region” has increased by roughly 250 bps.
In what Ives terms a “multi-year supercycle” for the iPhone 12/13, the supply chain issues are “nothing more than a speed bump,” with 230 million of the 975 million iPhones across the globe still due an upgrade after not changing handsets in 3.5 years.
However, Apple is much more than just hardware sales. With a $3 trillion market cap in its sights, the “linchpin to Apple's valuation re-rating” is its Services business, which is “further monetizing the Apple golden installed base and poised to reach $100 billion + annual revenue by 2024.” Ives thinks the Street values it at around half of that $3 trillion market cap - at $1.5 trillion.
There’s also the “highly anticipated” launch of the AR headset Apple Glasses, expected in the second half of the year, which should play into the metaverse narrative, while further down the line – by 2025 - the Apple Car could also make its debut, adding further value to the ever-expanding Apple story.
So, down to business, what does it all mean for investors? Ives maintained an Outperform (i.e., Buy) rating along with a $200 price target, suggesting the stock has room for upside of 16% over the next 12 months. (To watch Ives’ track record, click here)
Looking at the consensus breakdown, AAPL stock’s Strong Buy consensus rating is based on 21 buys, 4 Holds and 1 lone Sell. However, going by the $175.28 average target, most expect the shares to be trading around the same price a year for now. (See Apple stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.