Thursday, July 7

Apple has 21% upside potential as iPhone 13 sales set to surpass investors’ low expectations, JPMorgan says

Apple CEO Tim Cook inspects the new iPhone XR during an Apple special event at the Steve Jobs Theatre on September 12, 2018 in Cupertino, California.

  • Apple’s upcoming iPhone 13 launch should help boost shares by 21%, according to JPMorgan.
  • The bank raised its price target on Apple to $170 from $165 and reiterated its Overweight rating.
  • “We expect the outperformance beyond the September launch to be supported by iPhone 13 volumes outperforming relatively low investor expectations,” JPMorgan said.
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Apple is primed to reverse its year-to-date underperformance relative to the S&P 500 in the second half of the year as the company prepares to launch its upcoming iPhone 13 in September, JPMorgan said in a note on Tuesday.

The bank reiterated its Overweight rating and raised its price target on Apple to $170 from $165, representing potential upside of 21% from Friday’s close.

JPMorgan notes that shares are poised to rise over the next few months as Apple has historically outperformed the broader markets leading up to its September iPhone launch.

“The upside pressure on volumes for the iPhone 12 series, historical outperformance in the July-September time period heading into launch event, and further catalysts in relation to outperformance for iPhone 13 volumes relative to lowered investor expectations implies a very attractive set up for the shares in the second half of the year and thus expect AAPL shares to outperform the broader market materially in 2H21,” JPMorgan said.

The bank explained that shares of Apple have done well when either their new iPhone launch had high sales volume expectations, like after a multi-year design refresh, or when the new iPhone launch outperformed low investor expectations.

“We see the iPhone 13 launch as more of the latter, similar to the iPhone 11 cycle, with a multi-year 5G tailwind to the replacement rate and a larger installed base supporting stronger run-rate of annual volumes relative to current investor expectations, “JPMorgan said.

The bank expects Apple to sell 226 million iPhone units in its fiscal year of 2022, where as investor expectations are closer to the 210-215 million iPhone unit range.

“Net net, following a period of limited interest and underperformance in the shares, we believe the tide is set to turn [for Apple’s stock price],” JPMorgan concluded.