Apple Gets First Analyst Price Target Hike of 2015

Apple Inc. (NASDAQ: AAPL) received its first formal price target hike of 2015 from the analyst firm Argus. The firm expects Apple to set records for total revenue, total smartphone revenue and net income in its first quarter of 2015.

For the first quarter, smartphones are expected to have contributed 60% of the company’s revenue. At the same time, Apple’s phone market share appears to be growing, both domestically and globally.

After a 10% earnings per share decline in 2013, Apple bounced back with 13% earnings per share growth in 2014. Argus is expecting further double-digit earnings growth in 2015 and 2016.

Argus maintained its Buy rating for Apple, but the firm raised its price target to $125, which implies an upside of 16.1% for 2015. The stock has a consensus analyst price target of $122.21, with the highest price target at $150, or upside of 39%. Looking at Apple’s performance in 2014, the stock gained more than 40%.

In Apple’s first quarter, Argus estimates that 67.3 million iPhones were shipped, which would be up about 32% year-over-year. The analyst firm is modeling a global average sales price of about $600, which would be down 6% year-over-year and roughly flat with the prior quarter. On that basis, iPhone revenue is projected at $40.4 billion, which would be up 24% year-over-year and 71% from Apple’s fourth quarter, a seasonally weak quarter for the iPhone.

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In terms of the iPad, Argus is modeling approximately 20 million units sold, which would be up more than 60% sequentially. Unit sales, however, are likely to be down 20% to 22% year-over-year, as initial consumer fascination with this product has faded. Apple has responded by offering more models, and holiday-quarter total units likely benefited from robust sales of the iPad mini.

The Mac was the biggest surprise in Apple’s fourth quarter, with units up 21% year-over-year. The average sales price was about $1,200, down just 2% annually. Total revenue rose by 18% to $6.62 billion. Argus expects this strong pattern to continue. Looking ahead to the first quarter, Argus predicts Mac units will increase over 30% from the prior year to the 6.6 million range. Average sale price is expected to decline 8% to 10% and Mac revenue to rise more than 20% annually.

Argus said in its report on Apple:

Altogether, we expect Apple to generate fiscal first quarter 2015 revenue of $66.6 billion, which would be up 16% year-over-year, and GAAP earnings per share of $2.53, which would be up 22%. We expect revenue and earnings per share to decline sequentially in fiscal second quarter 2015. The sequential falloff in fiscal second quarter may be less than seasonal, however, given that the iPhone 6 and 6 Plus will be available in many key global markets only as of January 1, 2015. On that basis, we have raised our full-year 2015 fiscal year and 2016 fiscal year revenue and earnings per share estimates.

Argus raised its 2015 earnings forecast to $7.99 per diluted share from a prior $7.79, and its 2016 forecast to $9.17 from an initial $9.00.

Apple trades at 14.1 times the analyst firm’s 2015 earnings per share forecast and at 12.3 times its 2016 forecast. Apple also trades at discounts to the technology hardware peer group.

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Shares of Apple were down over 1% at $108.40 in the first half of the trading day Friday, in a 52-week trading range of $70.51 to $119.75. It has a market cap of roughly $636 billion.