Although uncertainty about demand for the iPhone remains worrying, investment bank Cowen expects demand to improve in 2020, driven by the new iPhone SE and rumors of a 5G “iPhone 12” .
Cowen is rumored to have the iPhone SE and iPhone 5G to spur growth in the Apple hardware industry.
In a note to investors released on Monday by Appleiphonestop, Cowen’s chief analyst Krish Sankar expects Apple to release March quarterly results “broadly in line with consensus”. “While Cowen expects” flat “revenues for the June quarter, he plans to improve smartphone sentiment later in 2020.
Apple stocks remain one of Cowen’s favorites for several reasons. On the one hand, Sankar said that the current weakness of the smartphone market is “well understood” and that in the future the debate will focus on the scale. Despite this, 2021 “promises to be a solid 5G for Apple,” wrote Sankar.
“While some tech investors prefer data center / PC names to smartphone stocks today, we expect sentiment to shift towards smartphones as C2H20 approaches,” said the analyst. .
Sankar added that Apple’s installed base estimates hover around 900 million units with the average age of the devices approaching 5 years, which implies a golden opportunity for an upgrade cycle.
For the March quarter, the analyst expects iPhone revenues to reach $ 25.1 billion based on 33 million units sold. In terms of expected construction numbers, Cowen added 2 million more units for the new iPhone SE compared to its last research note.
Although the company does not think Apple will guide for June, it predicts that the tech giant Cupertino will sell 37 million iPhones in the quarter, a 12% quarter-over-quarter increase and a 1% decrease compared to the same period in 2019.
Cowen predicts that Apple’s service sector will remain strong due to current home work policies against coronaviruses. This could ultimately demonstrate the resilience of the Apple model and be a clear boon for the valuation multiple of the stock. The services sector is growing at a compound annual growth rate of 18% between 2018 and 2021. And Cowen added that the launch of premium offers like Apple TV + could accelerate this growth trajectory.
While Sankar does not expect share buybacks in the June quarter, the analyst said Apple’s solid balance sheet is expected to “eventually benefit the stock as the buyouts return.”
The investment bank forecasts total revenues of $ 55.3 million for the March quarter. Given the uncertainty of the current COVID-19 situation, Cowen does not expect Apple to provide revenue forecasts for the June quarter.
Cowen reiterates its one-year price target of $ 335 for AAPL, which has remained unchanged since early April, based on a mixed multiple of 16x. Sankar arrived at this estimate based on an average of 12 to 13x for the iPhone and the hardware and 25x for the services. Earnings per share for year 21 is $ 15.65.