Apple is still in the ‘early innings’ amid strong 5G iPhone sales

Opinion: Apple justifies its huge valuation, while Tesla … not so much

Though Apple Inc. shares are falling despite a blowout earnings report, many analysts are cheering what the future holds for the company.

The smartphone giant recorded $1.68 a share in earnings on revenue of $111.4 billion Wednesday afternoon, both record figures that came in well ahead of the consensus forecast. The company’s iPhone business alone delivered holiday-quarter revenue that was $6 billion ahead of the consensus view.

Following the strong report, investors are left wondering whether Apple

can sustain its momentum, something Chief Executive Tim Cook addressed in response to a question on the company’s earnings call. Cook argued that Apple still has considerable organic growth opportunities stemming from newer products like wearables, emerging markets, enterprise sales and more.

Oppenheimer analyst Andrew Uerkwitz wrote positively of Apple’s potential in more mainstream product categories.

“We believe Mac (high single-digit share) and iPhone (low-teens share) have the most to gain, driven by Apple Silicon and 5G adoption, respectively,” he wrote, referring to Apple’s custom M1 chip that it is gradually rolling out to its Mac lineup. “We expect the significant performance/power efficiency advantages M1 demonstrated (only the first gen!) over mainstream competitors and a tighter integration between Mac and iOS devices to reinvigorate Mac growth and persuade more users to switch from Windows PC to Mac.”

He has an outperform rating and $160 price target on the stock.

Opinion: Apple justifies its huge valuation, while Tesla … not so much

Jefferies analyst Kyle McNealy wrote of an “impressive quarter with more to come” as Apple is still in the “early innings” of selling 5G devices. He’s upbeat about “a massive legacy installed base in China needing upgrades” as well as a weakened Huawei due to U.S. export restrictions. The strong iPhone cycle could also continue to be a catalyst for more services and wearables revenue, he said.

McNealy rates the stock a buy with a $160 price target.

Raymond James analyst Chris Caso also suggested that this latest report could be the beginning of a strong iPhone journey in a note titled “We Got the 5G Cycle We Were Looking For, We Don’t Think It’s Over.” He wrote that Apple not only saw greater December-quarter sales than he expected but also saw strong margins stemming from a greater mix of more expensive devices.

“While Apple delivered on this cycle, we’ve long considered this to be a two-year 5G cycle, with better global 5G coverage providing greater incentive for upgrades, along with what we expect to be a new form factor,” he wrote, while maintaining an outperform rating and upping his price target to $160 from $150. “We expect services to benefit from improving unit volume (which is adding to the installed base), along with new service offerings.”

Bernstein analyst Toni Sacconaghi wrote that “most striking” was Apple’s disclosure that the iPhone 12 Pro models sold “especially well” in the latest quarter, despite some economic pressures stemming from the pandemic.

He sees tailwinds for Apple through much of the current fiscal year as remote-work trends drive more technology purchases. “Ironically, despite some retail locations being closed, Apple appears to have been a strong beneficiary of reallocated consumer spending dollars during the pandemic,” he wrote. “That said, we worry that strength from an iPhone upgrade cycle and the pandemic could diminish in FY22, amid increasingly difficult YoY compares for the company.”

He has a market perform rating on the stock and upped his price target to $132 from $120.

Apple shares have gained 27% over the past three months as the Dow Jones Industrial Average

has risen 16%.

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