A number of analysts
revised their expectations for Apple's stock last week -- only to watch those year-end estimates melt in the face of the stock's current performance, which ended trading on Monday at yet another all-time high of $133 per share. The combination of much better-than-expected sales in the holiday quarter and the increasing interest in Apple's other initiatives -- ranging from Apple Pay to forthcoming products like the Apple Watch and a possible-but-far-off car design -- has sent the stock skyrocketing.
Stronger performance in China -- where Apple leapt into second place in smartphone share -- also played a role, but analysts may also be noticing a trend that centers in North America as well. In the previous quarter, Apple also sold
far more Macs than was expected -- and beat
all combined competitors in the smartphone arena, which pundits tend to obsess on. Apple, despite being the premium-priced "luxury" brand, has actually
gained marketshare against Android in North America in recent quarters -- and not just taking share away from Blackberry.
The Apple Watch is this year's X factor for revenues
American's northern neighbor, Canada, has played a small part in this Apple resurgence. Canadian monthly sales jumped to an all-time high in December, reports the
Wall Street Journal, driven largely on sales of the new iPhone 6 and Macs. On top of other record sales figures in emerging markets, Wall Street sees little chance of any serious downsides in the near-term, and have adjusted expectations accordingly.
Admitting to having been influenced by
Apple CEO's interview at his company's Technology and Internet Conference event earlier in February, Goldman Sachs analyst Bill Shope told his clients he has "greater confidence" in the company now than he did in December, and has raised the price target for AAPL to
$145 up from $130, maintaining his previous "Buy" rating. Shope noted that his view of Apple Pay, "the potential for the Apple Watch, and the prospects for sustained iPhone growth" were bolstered by the appearance.
Behind his rationale is some solid math. Even modeling a 26.5 percent drop in demand for the iPhone 6 models in the March quarter, he said, resulted in a revenue estimate that is above Apple's "conservative" guidance for the quarter, and analyst consensus. The strong US dollar is actually hurting the company, Shope mentioned, but he believes the current foreign currency conditions are already factored into the company's revenue prediction.
He also predicted that Apple would allocate a permanent $50 billion-per-year share buyback program, and raise dividends by 15 percent in the next cycle, which should come in April. He raised his personal estimate of first-year Apple Watch sales to 18.5 million (up from 15.5 million) but used an estimate of just 13.5 million units for his "base case," along with 21 million Macs sold in 2015, and 63.4 iPads -- for a total revenue of $231 billion and average margin 39.5 percent.
Keith Bachman of BMO Capital Markets also increased his AAPL target last week, but may need to revise it again soon. His new goal of $135 per share was almost matched on Tuesday. Like Shope, Bachman expressed greater confidence that the remaining iPhone user base -- which Cook noted in his remarks was largely unconverted -- will eventually upgrade to the iPhone 6 line or the successor lineup next fall. Bachman noted that even if just four percent of the 420 million iPhone owners also buy an Apple Watch within its first year, this would be nearly 17 million units -- which represent a new income stream. His own projections call for 19 million Apple Watch units in calendar 2015, not even the first full year of sales, with the majority coming next December.
Bachman believes iPhone sales in 2015 will run to 207 million units, though he told clients that figure may be conservative. "Apple's current iPhone offering, pending the Watch launch and the strength of Apple's family of products, combined with Apple's large and loyal installed base, gives us confidence in our iPhone forecast," he wrote in his latest memo. The firm is maintaining an "outperform" rating on the stock.
RBC tech analyst Amit Daryanani raised his estimate to $140 (up from the previous guess of $130), agreeing with Bachman that Apple is likely to
raise dividends to a combined $65 billion per year, and continue stock buybacks. Daryanani expects Apple will make around $66-67 billion in profit in fiscal 2015, meaning it could pass all of those profits to shareholders, raising its yield to two percent, without touching -- and perhaps even increasing -- its $180 billion cash reserves.
Like the others, Daryanani expects the Apple Watch, in whatever quantity it actually sells, to add billions to Apple's coffers. Growth in Apple Pay and other services the company offers beyond software and hardware should help with overall revenue as well. RBC is also maintaining its "outperform" rating on the stock, meaning the company expects Apple growth to outpace the average Nasdaq index overall. The stock is presently up 20.49 percent on the year to date, and 78.33 percent from a year ago.
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