Piper Jaffray Expects Apple (AAPL) Investors To Switch Valuation Methods, "We Remain Buyers"

March 20, 2017 6:31 AM EDT
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Price: $145.37 -1.05%

Rating Summary:
    44 Buy, 20 Hold, 5 Sell

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Today's Overall Ratings:
    Up: 4 | Down: 5 | New: 5
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Piper Jaffray maintains Overweight on Apple (NASDAQ: AAPL) price target of $155.00.

Following comments earlier which saw Cowen analysts raising AAPL price target by $20 (see: Apple (AAPL) PT Raised to $155 at Cowen, Street Estimates "WAY TOO LOW"), Piper analyst Michael Olson comments (emphasis ours) "Services accounted for 11% of Apple revenue in FY16, but we expect it will contribute a high teens % (modeling 17%) in FY20. As services approaches 20% of revenue, with a larger contribution to profitability due to higher margin vs. the core business, we expect many investors will shift to a sum-of-the-parts (SOTP) valuation. Looking ahead two years, valuing AAPL on FY20E, a SOTP analysis leads us to a value of ~$195/shr; discounted back two years (at 10%/yr) suggests a current fair value of $163. We remain buyers of AAPL due to expectation for growing anticipation around iPhone X (aka iPhone 8) and a strong trajectory for services revenue."

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 $139.99 Friday.

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Piper Jaffray, Cowen & Co, Michael Olson