On Thursday, Citigroup analyst Jim Suva raised his price target for Apple stock (AAPL) to $300 from $250, reports Bloomberg. Expectations of an upbeat holiday quarter were behind Suva’s price estimate boost. Suva also reiterated his “buy” rating on the stock. The new price target implies a 13% upside from AAPL stock’s current price. Yesterday, the stock jumped 1.5% in response to the target increase.
According to Bloomberg, “Suva cited the company’s ‘pricing strategies and recent demand trends’ as factors that ‘augur for a better Christmas quarter’ than last year, when Apple cut its revenue forecast. The consensus is ‘underappreciating the Apple Watch and Apple AirPods demand strength,’ he wrote, adding that Apple’s services business would also grow and help margins.” Suva expects the iPhone maker’s top and bottom lines to rise, reports Bloomberg, “but doesn’t see an expansion in Apple’s valuation multiple as this ‘has already expanded materially.'”
Wall Street forecasts strong holiday quarter for Apple
Suva’s target price increase is the second bullish call for AAPL stock this week. On Monday, JPMorgan Chase analyst Samik Chatterjee raised AAPL stock’s target price to $296 from $290. Chatterjee is optimistic about Apple’s new iPhone line up for 2020.
And in October, Cowen predicted the iPhone maker’s holiday quarter sales would cross $90 billion, reported AppleInsider. The financial services company cited strong iPhone demand and the services segment as the company’s driving forces.
Last week, Wedbush analyst Daniel Ives also predicted robust AirPods sales for the holiday quarter. According to CNBC, “Ives estimates that Apple could ship 65 million AirPods in 2019, and potentially reach 85 million to 90 million units shipped in 2020.” In August, Ives had estimated the AirPods sales would reach 50 million this year. To learn more, read Apple AirPods Take the Lead in the Hearables Market.
China to meet a sudden rise in AirPod demand
As AirPods could face a festive season shortage due to a sudden increase in demand, Apple has turned to China. On November 27, Nikkei Asian Review reported that the company had asked Luxshare-ICT to double the production of the high-end AirPods Pro to 2 million units per month. The iPhone maker also asked Goertek to increase the manufacturing of low-cost AirPods at its Vietnam factories, according to Nikkei Asian Review.
This news once again highlights US tech giants’ dependence on China. Just weeks before the next round of tariffs are set to take effect, the iPhone maker had to approach China to replenish inventories for its fast-moving AirPods.
Since the $249 AirPods Pro with noise-cancellation and water-resistance launched in October, they have taken the market by storm. Apple commands 45% of the hearables market, according to Counterpoint Research. Market trends suggest this share is only poised to expand on the back of AirPods’ immense popularity.
Apple Watch commands nearly 50% of the global market
Another star performer is the Apple Watch. In the July–September quarter, it captured almost half of the global wearables market, says Strategy Analytics.
Apple Watch aims to position itself as a top-notch health device. It already has specialized sensors for tracking heart health. Series 4 and 5 also have fall-detection features and a movement disorder manager to track Parkinson’s disease.
Although the Google-Fitbit deal last month likely came as a shock for Apple, its base of 1 billion iOS users could give the Apple Watch the edge. The deal could result in intense competition, but likely won’t threaten Apple Watch’s dominance. In August, TrendForce predicted Apple Watch shipments would expand by 21.8% YoY (year-over-year) to nearly 34 million units in 2020, reported Patently Apple. TrendForce analyst Jason Tsai said, “Apple’s success in the smartwatch market is based on an effective pricing strategy and a proactive approach to the development of new products.”
AirPods and Apple Watch to write growth story
AirPods and the Apple Watch form a significant part of the company’s wearables segment and are set to boost the stock. In fiscal 2019’s fourth quarter, the segment’s revenue grew by a stunning 54% YoY. Yesterday, the stock closed at $265.58, marking a year-to-date rally of more than 70%.