Wolfe Upgrades Apple (AAPL) to Peer Perform on Strong iPhone Demand

Wolfe analyst Jeff Kvaal upgraded shares of Apple (NASDAQ: AAPL) to Peer Perform from Underperform.

The analyst argues that healthy US operator promotions and Huawei share gains yielded robust iPhone 12 demand. He expects the same to happen for iPhone 13.

“AT&T, then Verizon, and now T-Mobile have all restored promos to existing customers, which lifted US upgrade rates. We expect competition plus rising 4G congestion to incent all operators to extend 5G promos well into the iP13 cycle. We believe Apple gained ~3% of share in China at Huawei’s expense plus further share in Europe. Huawei retains ~8% share in China and <4 % globally. We assume few of LG’s users shift to Apple,” Kvaal wrote in a client note.

“We lift our FY22 iPhone unit/ASP assumptions from 228mn/$824 to 232mn/$833 given well aligned US promos and ongoing share gains. This translates 4.6% sales growth and EPS of $5.85 (consensus 3.3%/$5.64).”

The analyst also names Apple’s strong supply chain and elevated ASPs as tailwinds.

“Our supply chain work indicates Apple has sufficiently elbowed aside rivals to allow production of up to 90mn iP13s in 2H21, which is up from ~80mn iP12s in 2H20. We believe Apple intends to pass along higher costs with pricing increases that, while modest, add to FY21’s record ASPs,” he adds.

Kvaal also uses earnings reports from other PC manufacturers to say AAPL likely also experiencing strong demand for MacBooks and iPads.

“Recent PC results indicate demand remains well ahead of supply. We consider both products on a permanently higher trajectory as ~50% of shipments through the pandemic have been to new users. We retain our long term view the M series chips will harmonize the Mac and iOS ecosystems and convert more Windows users to MacOS.”

A new target price on AAPL is $155.00 per share from the prior $135.00.

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