Shares of Apple Inc. (NASDAQ:AAPL) are solidly higher Wednesday, thanks to broader market strength and a positive analyst action.
The Apple Analyst: UBS analyst David Vogt upgraded Apple shares from Neutral to Buy and increased the price target from $115 to $142.
The Apple Thesis: Apple shares aren’t currently reflecting the option value of the company’s likely entry into the auto market, analyst Vogt said in a Wednesday morning note. This along with the forecast for a more stable long-term iPhone demand backdrop is behind the bullish disposition of UBS, the analyst said.
Stable iPhone Demand & Higher ASPs Bode Well: Aggregate iPhone demand in fiscal years 2021 and 2022, the analyst said, is likely to be relatively stable, in line with historic demand trends. The analyst is not too confident of a supercycle materializing.
UBS modestly raised its 2021 iPhone forecast by 5 million to 220 million, attributing the upside to better 5G demand in China. The stickiness of the iPhone ecosystem, the firm said, has prompted it to increase its 2021 estimate by 10 million to 215 million, in line with normalized long-term demand trends.
Citing better iPhone units and ASPs, the firm raised its 2022 revenue and EPS estimates by 4% and 7%, respectively.
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Apple To See S-shaped Adoption Curve In EV Market: Apple’s platform strategy and market share in the global PC and smartphone markets should enable the company to introduce a branded battery electric vehicle and achieve a minimum 5% market share in the global BEV market, Vogt said.
With the global automotive market likely transitioning to almost 100% EV over the next 10 years, a 90-million-unit market opens up for new entrants with large installed bases of loyal satisfied customers like Apple, UBS said.
“Although Apple is not the first mover, its significant resources should enable the company to be a “fast follower” in time for the steep portion of the S-shaped adoption curve, similar to the iPhone launch in 2007,” the firm said in the note.
Apple Price Action: Apple shares were up 2.82% to $123.28 at last check early Wednesday afternoon.
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(Photo: Bangyu Wang via Unsplash)