Loop Capital Upgrades Apple (AAPL) to Buy on Multiple Upside Drivers Into CY21

(Updated - November 30, 2020 7:27 AM EST)

Loop Capital Markets managing director Ananda Baruah upgraded Apple (AAPL) to a “Buy” from “Hold” on numerous growth drivers.

Similar to other analysts, Baruah sees iPhone build plans for December through June next year as a signal that shipments may come ahead of the Street’s consensus.

“Loop Capital Supply Chain Analyst John Donovan sees iPhone builds for the December/March/June quarters of 88M/62M/46M (no Street estimates available) with incremental strength (ASP and margin) in Pro demand. We see the builds translating into iPhone units and revenue of 78M/54M/45M and $59.3B/$40.3B/$30.4B vs. Street of 75M/50M/42M and $58.8B/$38.1B/$30.7B,” Baruah wrote in today’s note to clients.

Furthermore, Loop Capital argues that the market “underestimates” Apple’s ability to serve at-home customers. Sales of Mac and iPad units are likely to receive a boost from people spending more time to work and learn from home.

“For the December/March quarters, we see the strength translating into Mac units and revenue of 7M/6M and $9.8B/$7.5B vs. Street of 6M/5M and $8.5B/$6.6B. The Mac remains supply constrained and improved product availability is not anticipated until well into CY21, while current share gains with consumers and in enterprise, aided by new AAPL silicon Macs, can sustain some of the current strength even with a COVID vaccine on the horizon.

“AAPL has been driving iPad upside driven by education and work from home tailwinds. Currently, the Street has softer than seasonal revenue trends in place forecast for the December quarter, whereas Loop’s checks highlight a worst-case scenario of seasonal trends with a best-case scenario of stronger than seasonal sales.”

As the number of new customers grows, AAPL is also expanding the base to which it can sell other products and services. Revenue growth in the Services business is not upgraded by Baruah, but she leaves space for an upside revision on continued installed base growth. The same scenario applies to Wearables & Accessories unit.

The analyst also raised the price target on AAPL from $117.00 per share to $131.00.

“If our thesis proves correct and product outgrowth sustains well into CY21 driving accelerated growth in high-margin services sales, the expanded premium is warranted,” Baruah concludes

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $116.60 yesterday.

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