Analysts Increase Bullishness on Apple Heading Into Earnings

December 28, 2018


Wall Street’s confidence in Apple’s (AAPL) ability to grow amid a tough time for tech is increasing.

Analysts bullishness is prompting widespread price target hiking. According to FactSet, 10 of 14 analysts providing price targets in the past month have raised their estimates, with some targets reaching as high as $300, as Apple’s earnings results approach post-market on Thursday.

“Apple had not only the lowest P/E multiple amongst the large technology companies, it also offered one of the lowest Price-to-earnings multiple for every point of growth making it a strong value pick,” J.P. Morgan analyst Samik Chatterjee wrote in his preview. “We continue to rate Apple Overweight and with a $272 Dec 2019 price target.”

Services Segment Sets Up Future

Much of the growth that analysts expect toward their bullish price in the long term is driven by the services segment.

The services category includes iTunes, the App Store, the Mac App Store, Apple Music, iCloud, Apple Pay, and AppleCare.

“Current ~16x PE is a slight premium to historic 15x but still makes Services look undervalued,” Jefferies analyst Tim O’Shea said in his initiation of coverage on Oct. 26.

O’Shea explained that the value of the services business is being underestimated as the core of the business migrates toward the segment.

“As the business rapidly mix-shifts towards this more recurring revenue model, we see upside to gross margin estimates over time with our 2022 estimates, 100 bps higher…

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