evercore ISI’s analyst Amit Daryanani has been one of the latest Wall Street analysts to publish a report on Apple stock. While he has maintained his bullish rating on the shares intact, he upped the ante and set a Street-high price target of $175 apiece this week – for upside of over 40% from current levels.
Today, the Apple Maven looks closer into why the analyst believes Apple is such a strong buy today. I then add the perspective of another bullish expert, who believes Apple’s market value is heading to $3 trillion in the foreseeable future.
Not all about the iPhone
Apple has been most closely associated with iPhones in the past decade and a half. But this analyst supports his bullish thesis on factors that do not always make the headlines: services and wearables.
Here is what Evercore currently sees:
“A clear path to $100 billion in services revenue by fiscal 2025 and $70 billion for wearables. The growth should help drive margin expansion and help smooth out the cyclical nature of the hardware business.”
Should the research shop be right about the services opportunity, Apple would effectively double segment revenues in five years, as it did between 2016 and 2020. I recently argued that the feat could be achieved, especially with the introduction of new service offerings (that are either too nascent or have yet to caught on, such as Fitness+ and Arcade+) and the launch of the Apple One bundle.
On the wearables side, growing to $70 billion by 2025 would mean more than doubling fiscal 2020 revenues of $31 billion. There are a couple of ways that Apple could reach this goal, and the company would probably need to execute on all fronts at the same time to be successful:
- Grow market penetration in smartwatches;
- Widen the product portfolio in earphones and home devices;
- Introduce category-defining products,such as mixed reality headsets.
Wrapping up the bull case, Evercore mentions two other factors. First, share buybacks could accelerate, as Apple tries to put its cash pile to use in a low-interest environment. Second, the research company sees valuation multiples staying higher for longer, as Apple earns a consumer goods premium.
The usual suspects: 5G super cycle, Apple Car
On the path to $175 per share, Evercore did not forget to mention some of the trendier, high-flying growth opportunities – among them, the Apple Car. But when it comes to seeing the longer-term trends, Wedbush’s Dan Ives is probably the analyst that relies on them the most to support his own $175 price target (or $225, under his best-case scenario).
According to Wedbush, the “super cycle party” should continue with the launch of the iPhone 13, later in 2021. The analyst believes that roughly 40% of the global iPhone installed base is due for an upgrade.
On the electric vehicle front, the opportunity could reach $5 trillion over the next decade. Wedbush thinks that Apple could announce a production partner this summer, and soon kickstart its fight for share in this promising new market.