Apple Lovefest Continues; Analysts Hike Price Targets
Analysts were quick to raise their price targets on Apple one day after the maker of iPads and iPhones reported another blowout quarter that exceeded expectations.
"The party is just getting started," said JPMorgan, which overweights Apple stock. "In our view, the return of the wow factor, easing supply constraints, and pending new product cycles should jettison the fear that had been dogging valuation the last couple of months. We are raising our Dec. 12 price target to $525, versus $450 previously."
For the September quarter, JPMorgan now expects Apple revenue of $29.63 billion from $28.85 billion, and earnings of $7.15 a share from $6.91 a share previously. JPMorgan makes a market in Apple shares.
One thing JPMorgan likes in particular? Apple reported revenue in China rose six times year-over-year to $3.8 billion, and that it is "still just scratching the surface" in the region.
Whether there is room for Apple to grow concerns Andy Hargreaves, senior research analyst at Pacific Crest Securities, which has an "outperform" rating on the stock. His company also makes a market in the stock.
"The thing worth thinking about is how big is the iPad market really is and how much profit potential there is in that market," he said.
Hargreaves wasn't expecting the "iPhone cannibalization" he's seen, taking sales from Apple's Mac notebooks as well as its iPod Touch. "We’ve seen iPod touch sales weaker than what we thought and I think that’s a direct impact from how the iPad has done," he said.
Hargreaves believes Apple should give shareholders some of the $76 billion in cash it's sitting on. "The cash becomes an anchor," he said. "It looks like an anchor when you look at the multiple on the stock. There’s no way it should be trading at the discount to growth it is."
Gleacher & Co. said Apple "continues to defy modern principles of economics and delivered the investment community something never seen before" in terms of quarterly growth. The firm expects Apple to become "the largest market-cap company on the planet when the company hits approximately $445." Gleacher raised its price target to $500.
Also raising price targets on Apple were Goldman Sachs, to $525; Bank of America Merrill Lynch, to $515; Morgan Stanley, to $468; and Citi, to $480.
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Disclosure information was not available for most of the companies raising their price targets on AAPL.