A ‘drop the mic’ quarter: 3 Apple stock analysts explain why they’re boosting price targets after a monster 2nd-quarter earnings report

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  • Apple turned in earnings and revenue for its financial second quarter that surged past Wall Street’s expectations
  • Goldman Sachs upgraded Apple shares to neutral from sell following the earnings report.
  • JP Morgan and Wedbush increased their price targets for the tech giant.
  • See more stories on Insider’s business page.

Apple’s second-quarter financial report outstripped expectations set by Wall Street, bolstered by a 66% climb in iPhone sales and the reopening of its 220 stores in the US that had been shut by the pandemic.

Quarterly revenue of $89.6 billion was higher than $77.3 billion expected in a consensus estimate from Yahoo Finance. Earnings of $1.40 per share trounced the average estimate of $0.56 per share.

“Our original view that the iPhone cycle would disappoint in the midst of COVID was clearly wrong. Not only has Apple done better than we expected on iPhone during the cycle but Mac and iPad have also materially outperformed our forecasts,” said Goldman Sachs equity analyst Rod Hall in a Thursday note in which he upgraded Apple to a neutral rating from sell. Apple’s results prompted other analysts to raise their price targets on the tech industry behemoth.

Apple shares advanced during Thursday’s session.

Here’s what three top Wall Street analysts had to say about Apple’s report.

Wedbush: “Cook & Co. Deliver a ‘Drop the Mic’ quarter

iPhone revenue beat Wedbush’s expectations by 17% “in a jaw-dropping performance as the iPhone 12 supercycle is playing out before our (and the Street’s) eyes,” wrote analyst Dan Ives.

The iPhone 12 will hand the baton to iPhone 13 in September as part of a multi-year 5G upgrade cycle, he said, adding that China remains the fuel in the iPhone 12 cycle, with no signs of slowing down based on its recent Asian supply chain checks and supported by Apple’s high-level outlook for the June quarter.

“Of course chip shortages will have a headwind for the next few quarters (roughly $3 billion to $4 billion headwind in the June quarter) for Apple like every technology/automotive player, but the reality is this product cycle is enabling Cook & Co. to achieve its next level of growth and monetization looking ahead,” wrote Ives.

Wedbush raised its price target $185 from $175, with a bull target of $225. It kept its outperform rating on the stock and said Apple remains on its “Best Ideas List” for 2021.

Goldman Sachs: Apple “materially beats in all segments”

In highlighting some of Apple’s figures, Goldman said iPhone revenue of $48 billion was 30% higher than its estimate, and continued work-from-home demand pushed Mac revenue up by 70% year over year to $9 billion, which was 2% higher than its forecast. It noted that Apple mentioned that both Macs and iPads remained supply constrained because of strong demand.

Analyst Rod Hall said since being added to Goldman’s Americas Sell List in mid-April 2020, Apple’s stock has surged 86% compared with the S&P 500’s gain of 49%.

“Our forecasts move up to match the beat and June revenue indications and are now closer to consensus. While we continue to believe current levels of demand are likely to be tough to sustain, we equally acknowledge that high-end consumers have proven far more resilient through the pandemic than we expected,” wrote Hall.

Goldman raised its 12-month price target to $130 from $83.

JP Morgan: “5G has more legs than one quarter”

Analyst Samik Chatterjee said the 5G iPhone cycle is not only spurring strong consumer upgrades and switches, it’s also positioning Apple for a higher share of the overall smartphone market. As well, Apple is likely to see further demand from customers and enterprise channels for Macs and iPads “much longer than investors presume at this time,” stemming from the changing landscape of where and how people work.

“We raise our revenue and earnings estimates for FY21 on the strength, but more importantly raise our out-year iPhone, Mac, iPad and Services revenue expectations as well, as we expect Apple to continue to build on the strength with stronger replacement cycle-led demand and greater Services opportunity on a larger installed base,” said Chatterjee.

The investment bank raised its price target to $165 from $150 and reiterated its overweight rating.

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Apple will finally let you unlock your iPhone with Face ID while wearing a mask, but only if you have an Apple Watch

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  • Apple’s latest software update will let you unlock your iPhone with Face ID while wearing a mask.
  • But there’s a catch: You’ll need an Apple Watch to use the feature.
  • Your iPhone will detect if your Apple Watch is nearby to unlock it if you have a mask on.
  • See more stories on Insider’s business page.

Apple’s new software update will let you unlock your iPhone using Face ID when you’re wearing a mask – but only if you have an Apple Watch.

That’s because the iPhone will need to communicate with your Watch to verify that it’s you, since it can’t detect your entire face. If your Apple Watch is near you and unlocked, your iPhone will then also unlock.

To change the settings in your iPhone to enable the new pandemic-era feature, first update your device to run iOS 14.5, which became available on Monday. Then, navigate to “Face ID & Passcode” and then enable “Unlock with Apple Watch.”

Apple did not immediately respond to Insider’s request for comment.

Read more: The battle between Facebook and Apple over privacy is about more than just ads – it’s about the future of how we interact with tech

The latest iOS update also includes Apple’s “App Tracking Transparency” feature, which will require app developers to ask for permission to collect and track users’ data across their devices. Many developers took issue with the feature when it was announced in September, prompting Apple to delay it to 2021 to give more time to prepare for the update.

In December, Apple also rolled out information privacy labels that tell users how apps are collecting information about them as part of its privacy crackdown.

The new feature has angered Facebook in particular since it directly impacts the social media giant’s lucrative ad business, which relies upon data tracking to inform its algorithm that decides which ads to put in front of online users. Facebook has argued that Apple’s new feature will adversely impact small businesses since they rely heavily on personalized ads.

Facebook took out full-page ads in The New York Times in December blasting Apple’s privacy crackdown.

“Without personalized ads, Facebook data shows that the average small business advertiser stands to see a cut of over 60% in their sales for every dollar they spend,” read one of Facebook’s ads.

The two companies have a long-standing rivalry, with both taking aim at each other over business practices. Apple accused Facebook of showing a “disregard for user privacy” and Facebook has accused Apple of charging “monopoly rents” in its App Store.

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Dozens of Al Jazeera journalists’ iPhones were hacked using spyware from Israeli security company NSO Group, report claims

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  • Sophisticated spyware was used to hack the phones of 36 Al Jazeera journalists, Citizen Lab said in a new report.
  • Citizen Lab said the hack, which it dubbed “Kismet,” could be traced back to software made by Israeli security company NSO Group.
  • NSO Group denied any involvement.
  • Citizen Lab said it believed the hack was ineffective against iPhones with the iOS 14 update, but that the scale of the hack prior to that update could be worryingly large.
  • Visit Business Insider’s homepage for more stories.

Journalists at news organization Al Jazeera were targeted by an iPhone hack that sent iMessages loaded with malware, the University of Toronto’s Citizen Lab reports.

The hacking tool, dubbed “Kismet,” was a zero-click, zero-day hack, meaning Apple had no idea the exploit existed, and the malware didn’t need targets to click on anything for it to take effect.

Citizen Lab said the attack used the “Pegasus” software made by well-known Israeli security company NSO Group. 

Citizen Lab said it had identified four separate entities using Pegasus in the attack. It said it could, with “medium confidence,” link one of the four to Saudi Arabia, and another to the United Arab Emirates.

In a statement to Business Insider, NSO Group denied involvement, saying Citizen Lab’s report was based on “speculation.”

“NSO provides products that enable governmental law enforcement agencies to tackle serious organized crime and counterterrorism only, and as stated in the past we do not operate them,” a spokesperson for NSO Group said.

“However, when we receive credible evidence of misuse with enough information which can enable us to assess such credibility, we take all necessary steps in accordance with our investigation procedure in order to review the allegations,” they added.

This isn’t the first time NSO Group’s Pegasus software has been linked with hacking journalists’ phones.

In June of this year, Amnesty International said Pegasus had been used by the Moroccan government to hack a Moroccan journalist’s phone. NSO Group did not confirm nor deny the claims, and promised to investigate.

In October last year, Facebook filed a lawsuit against the company claiming its software was used to perpetrate a large-scale hack of WhatsApp users, including journalists and human rights activists. NSO is fighting the lawsuit. 

Citizen Lab said it believed the hack was ineffective against iPhones with the iOS 14 update, but that the scale of the hack prior to that update rolling out could be worryingly large.

“Given the global reach of NSO Group’s customer base and the apparent vulnerability of almost all iPhone devices prior to the iOS 14 update, we suspect that the infections that we observed were a minuscule fraction of the total attacks leveraging this exploit,” Citizen Lab said in its report.

While Citizen Lab first detected Kismet in July 2020, it said device logs suggest the hack was being used as far back as October 2019.

An Apple spokesperson told Business Insider that iOS 14, which was launched in September of this year, was more robust.

“At Apple, our teams work tirelessly to strengthen the security of our users’ data and devices. iOS 14 is a major leap forward in security and delivered new protections against these kinds of attacks. The attack described in the research was highly targeted by nation states against specific individuals. We always urge customers to download the latest version of the software to protect themselves and their data,” the spokesperson said.

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