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Deutsche, Piper Jaffray Increase Apple Share Price Targets

Oct 31, 2019
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Cupertino tech giant Apple releases its fourth-quarter earnings yesterday. Apple has grown iPhone revenues over the quarter, in a positive sign, but the company has failed to match or exceed earnings from the smartphone last year. However, at that time, sales from the iPhone X were still pouring heavily in the company's coffers. Now, following yesterday's earnings call several analysts have increased price targets for the company.

Piper Jaffray, Deutsche & Wedbush Raise Price Estimates For Apple Following Fourth-Quarter 2019 Earnings Release & Call

The big game in the high-end smartphone world right now is 5G. While American customers will have to wait for networks, in China, 5G will be available to consumers starting Friday. The country's three state telecommunication providers, China Mobile, China Unicom, China Telecom, have confirmed the launch - with plans to starting from 128 Yuan, reports Reuters.

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Apple's iPhone sales in China will, therefore, drop in the following months, especially since high-end 5G alternatives from other companies are available. The Cupertino tech giant did not introduce 5G on the iPhone this year, as the company's need to control hardware on its smartphones has made it come at odds with Qualcomm.

Apple's shipments declined by 28% in China this year, which is no surprise given current market conditions. Soon after the iPhones were launched, we witnessed a flurry of leaks related to next year's flagship smartphone lineup from Apple (NASDAQ:AAPL). However, it looks as if analysts from Piper Jaffray, Deutsche Bank and Webush are also convinced that Apple does have 5G in the pipeline as all three have raised price targets.

apple macos catalina 10.15

Deutsche cites improving margins and Services revenue as being the primary factors behind its changed fair value price estimates. Apple (NASDAQ:AAPL) earned $2.5 billion more through services this year than it did a year back, and with the company aggressively marketing Apple TV, it might further monetize an existing, loyal customer base. Apple's Gross, Profit and Operating Margins are shown below.

Piper Jaffray has raised its price estimates to $270 from $243, citing services as the reason, and predicting that 5G will help the iPhone take off. Wedbush is the most optimistic of the three, with its target now set at $300, up from $265. The firm also believes that Apple will ship 190 million iPhones this year.

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4Q19: 3Q19: 4Q18: 3Q18: FY18
Gross Margin: 38.01% 37.55% 38.31% 38.46% 38.33%
Operating Margin: 86.41% 83.83% 87.28% 85.37% 88.37%
Net Profit Margin: 21.39% 18.59% 22.42% 21.58% 22.40%

 

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