Apple is set to outperform its FAANG stock competition in 2021, according to Loup Ventures’ Gene Munster.
In an interview with CNBC on Thursday, Munster discussed the recent big tech earnings season and lauded Apple’s performance.
“I have a prediction that Apple’s going to be the top-performing FAANG for 2021. I’m well behind Google right now, I think they’re up 30% to 40%, Apple’s just up fractionally, but I continue to stand behind that,” Munster said.
Munster added that Apple’s recent quarter was the best he has seen in a decade and that he believes the stock will move to $200 per share.
Apple’s revenue jumped 54% to $89.6 billion in its latest quarterly report. The company also notched a profit of $23.6 billion and increased its cash dividend by 7% increase to $0.22 per share.
Management authorized an increase of $90 billion to Apple’s existing share-repurchase program as well. Analysts mostly reacted positively to the stand-out quarter.
Wedbush’s Dan Ives called the performance a “drop the mic” moment for Apple and CEO Tim Cook.
Munster said that naysayers will argue this quarter’s outstanding performance isn’t sustainable with touch comps ahead, but he believes Apple will continue to prove the bears wrong by moving into new lines of business.
To Munster’s point, Bank of America’s Wamsi Mohan maintained his “neutral” rating on Apple after the company’s blowout quarter.
Mohan told CNBC that antitrust risks, a potential corporate tax increase, and tough comparisons to previous quarters that were boosted by the work-from-home trend could drag on the stock in the coming months.
Gene Munster disagrees, noting that Apple has new opportunities in hardware as a service (renting Macs, iPhones, iPad in bundled form), mixed reality, and electric vehicles that will buoy the company moving forward.
Munster said that “transformative tech” companies like Apple will continue to make strides, despite questions about lofty valuations.
Apple will report its fiscal second-quarter earnings after the market closes on Wednesday, and all eyes will be on iPhone sales and guidance as the Street debates whether we are seeing an iPhone “supercycle.”
The average analyst estimate for Apple’s upcoming earnings report includes revenue of $77.35 billion and earnings per share of $0.99, according to data from Yahoo Finance.
Over the last two years, Apple has beaten EPS, and revenue estimates 100% of the time.
Overall, Wall Street remains bullish on Apple’s prospects. The company boasts 26 “buy” or “strong-buy” ratings, nine “hold” ratings, and just two “sell” ratings from analysts.
Insider gathered four Wall Street analysts’ predictions for the tech giant’s fiscal second-quarter earnings report.
Goldman Sachs: A strong report is “likely,” but composition is what matters
Goldman Sachs analysts, led by Rod Hall, CFA, said that Mac and iPad sales will be a standout in the upcoming quarter. However, in Hall’s view, the really important growth figures are iPhone sales and guidance.
“Current high levels of both iPad and Mac demand are unlikely to be sustainable as the world re-opens, so another beat driven more by these areas may not be enough to drive the shares further,” Rod Hall, CFA, said.
“We continue to believe the trajectory of iPhone demand is the main determinant of whether Apple can make what we see as overly optimistic consensus forecasts for the end of 2021 and this may be the first quarter in which data points from Apple begin to confirm what supply chain adjustments already suggest,” Hall added.
The Goldman team criticized other Wall Street analysts for their belief in a “supercycle” of iPhone sales. The team said based on recent checks, they expect demand to fall off for iPhones after 2021.
Goldman Sachs holds a “sell” rating and a $83 price target on shares of Apple.
Wedbush: “Sunny days in Cupertino”
Wedbush’s Dan Ives expects an iPhone “supercycle” to be at the forefront of Apple’s earnings report on Wednesday.
The analyst said he believes Apple will beat both top and bottom-line estimates and has the potential to sell north of 240 million iPhone units in 2021.
“We have not seen a robust launch uptrend such as this in a number of years for Apple and the only iPhone trajectory similar would be the iPhone 6 in 2014 based on our analysis,” Ives said.
“While the Street is forecasting roughly 220 million iPhone units for FY21, we believe based on this current trajectory and in a bull case Cupertino still has potential to sell north of 240 million units (~250 million could be in the cards – an eye-popping figure) which would easily eclipse the previous Apple record of 231 million units sold in FY15,” Ives added
Ives also said that the Street is worried about moderation in growth due to the chip shortage, but said he “strongly disagrees” with that assessment and that this is the most “robust” iPhone cycle he has seen in years.
Wedbush holds an “outperform” rating and a $175 price target on shares of Apple.
JP Morgan: Expecting “a revenue beat” with dividends and repurchases in focus
JP Morgan analysts said that the Street’s expectations for a revenue beat have been increasing amid rising demand for Macs and iPads.
The analysts forecasted upside in both Mac and iPad sales in Apple’s FQ2 report and predicted 18% year-over-year growth in services revenue.
The team also believes Apple’s guidance will be limited in the quarter, and will mostly indicate FQ3 is typically a slower quarter for the firm. A dividend increase and share repurchases are also in focus at JP Morgan.
“We expect another $50 billion authorization similar to last year and a high single-digit percentage increase in dividends,” the JP Morgan team added.
JP Morgan holds an “overweight” rating and a $150 price target on shares of Apple.
Bank of America: “iPhone sales, capital return in focus”
Bank of America analysts, led by Wamsi Mohan, said they expect a “strong” quarter from apple with revenues in the $83 billion to $85 billion range and EPS at $1.10.
Mohan and his team believe Apple is set to outperform due to a benefit from the work-at-home trend.
“The company continues to benefit from increased spending on electronics given the remote work/home environment and from government stimulus cheques to consumers,” the analysts wrote.
Mohan is modeling a 30% jump in App store revenue and expects gross margins to benefit from a better mix and FX rates.
BofA analysts also expect a $50 billion buyback program to be announced along with a 5% dividend increase.
The bank holds a “neutral” rating and a $155 price target on shares of Apple.