Jefferies has issued a Hold rating and a $110.00 price target for Apple (NASDAQ: AAPL). According to Sundeep Bajikar, an analyst, “Because of Moore Stress, the ability of Apple to differentiate its high-end hardware from its lower-end alternatives is under threat. Apple’s hardware-driven premium product strategy has worked effectively for the company so far. As a result of our ecosystem study, we conclude that Apple, like Google, has the potential to expand software/service monetization over a broader installed base, but at lower hardware pricing.” Bajar claims that Apple is looking to expand its ecosystem. We believe that increasing the installed base of Apple devices would be more beneficial to the company than increasing the revenue generated from current customers’ purchases in the long term.” According to the expert, an extension of the ecosystem is seen as a benefit of Apple Pay.” Based on our research and hands-on testing, we estimate an Apple Pay upside of $1 to $15 per device installed base that would offset lower device ASPs as Apple continues to grow its installed base. Counterpoint statistics and checks show that lower-priced Android smartphones continue to outpace iOS devices in market share. Apple will likely continue its efforts to get a foothold in the growing mid-range smartphone market. Apple Watch’s reduced costs (again, compared to iPhone) might also assist develop the ecosystem.”
Bajar advises traders to wait for a better opportunity to get in on the action. From its three-year average of 12x to 14.5x in the previous six months, AAPL’s P/E (NTM) increased by 20%. We believe the company is already pricing in EPS of $8+, even after considering Samsung’s share price increases, so we believe there is an immediate downside risk. Samsung (005930 KS) outperforms Apple (AAPL) in the long run due to Samsung’s superior technological position and reduced share price. With a lower valuation or indications of a transition in the company’s business model to software/services, we might turn more positive on AAPL.” Apple’s stock finished the previous day at $100.11 per share.
Apple has been a favorite among investors for years, and the company’s strong earnings in recent quarters have only increased the attention on AAPL stock. The company reported incredible growth in the first quarter thanks to the new iPhone models and a strong performance from the company’s services business. The stock has surged since that earnings report, and analysts remain bullish on Apple’s prospects thanks to solid demand for the new iPhone X and a strong pipeline of new products expected in the next year.