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Piper Jaffray Ups Price Target and Earnings Estimation on Apple Thanks to 5G iPhone

Posted on Friday, December 20th, 2019 by Steve Anderson

Piper Jaffray Ups Price Target and Earnings Estimation on Apple Thanks to 5G iPhone

One of the biggest problems for Apple (NASDAQ:AAPL) for the last few years now is a perceived lack of innovation coming out of the company. That wasn't a problem for a good while; ever since 2007 and the first iPhone, Apple devices were seen as the most innovative around. Though with successive iterations, each started looking a lot more similar to the last. However, a new report out from Piper Jaffray suggests that that may not be the case with the 5G iPhone, and the analyst has bumped up price targets and earnings estimations accordingly.

New Enough to Blow Away Doubt

Piper Jaffray's position on the 5G iPhone suggests that it's coming out at the perfect time. Not only is it coming out to some sharp interest from the market, but that market is also willing to bear some downright shocking costs to get their collective hands on one. Interest reportedly remained strong at even $1200 a unit, which is a hefty price tag even for a new smartphone.

The revelation that 23% of respondents would buy in at the $1200 mark was noteworthy enough, but where things got especially interesting was that this figure remains roughly unchanged from a similar study taken back in September. It's also up from a study taken in June, where interest in a high-dollar 5G iPhone was at a still-respectable 18%.

This combination was sufficient for Piper Jaffray to not only keep its “overweight” rating on the stock but also ramp up the price target from its original $290 to $305. Originally, Piper Jaffray was using a 1% growth projection rate for iPhone sales, but now, reports suggest that was up to 3%.

A Partially Cannibalized Market

The September study from Piper Jaffray actually revealed a point that was central to this entire notion. There's no doubt that iPhone 11 sales were sluggish as compared to previous versions, but a good chunk of that was due to people holding off thanks to the likely-upcoming 5G version. While the iPhone 11 did offer a good price, that was particularly affordable compared to previous versions, many were holding out for the real upgrade to come, and that hurt sales of the current version. However, iPhone 11 sales did ultimately turn out better than expected at the time, which was a plus.

The earlier Piper Jaffray study spelled that out well: just 51% of respondents were willing to buy one of the latest iPhones this year, compared to 69% who were ready to buy an iPhone XR, XS, or XS Max. Those who did buy in on the latest iPhone were said to be favoring the lower-end models as well.

With the new unit, however, Piper Jaffray is expecting the new iPhone to represent not only greater confidence in short-term results, but also an increasing anticipation for the next iPhone, which should help keep customers in the fold.

Counting Chickens Before They Hatch?

There's only one immediate issue that could get in the way of Apple's joyful resurgence back up to the top of the portable tech heap, and that's an issue of carts and horses. While Apple has a history of building excellent carts—mobile devices for those who'd rather not muddle through the metaphor—the horses of network availability may not be all that ready by the time the device rolls out.

A look at 5G service availability shows a depressing dearth of targets. A quick search for “5G rollout” featured Verizon (NYSE: VZ) at the top of the listings, including the tagline “now in parts of select cities.” Looking more closely at Verizon's availability calls attention to certain stadiums.

Availability from the other providers looks a little better; AT&T (NYSE: T) expects nationwide coverage sometime before July 2020, and T-Mobile (NASDAQ: TMUS) has commercial 5G up and running in over 5,000 cities and towns throughout the country. Sprint's (NYSE: S) 5G has landed in a handful of major cities, and US Cellular's (NYSE: USM) plans are basically “coming in 2020.” Several other providers are in the “coming soon” bracket, including Charter (NASDAQ: CHTR), Comcast (NASDAQ: CMCSA), Starry, C Spire and more.

Though there will be some lag between the network rollouts and Apple's launch—which history suggests will take place around September 2020—the difference should be sufficiently split that many who buy a new 5G iPhone will actually have 5G to use it on, while those who don't have it exactly at launch will probably have it within a couple of months.

Still, for some places, this might end up being a photo finish, and if anything goes wrong in the 5G rollout, a lot of Apple users may be all dressed up with nowhere to go, a disastrous development for Apple. If the rollout proceeds according to plan, though, this could be the start of a big return to form.

Companies Mentioned in This Article

CompanyCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
AT&T (T)$38.63-1.1%5.38%17.32Hold$39.50
T-Mobile Us (TMUS)$82.18-0.4%N/A21.02Buy$93.27
United States Cellular (USM)$36.51flatN/A24.84Buy$48.10
Charter Communications (CHTR)$513.14+0.5%N/A92.79Buy$473.86
Comcast (CMCSA)$45.65-3.8%1.84%16.91Buy$51.05
Sprint (S)$5.04+0.4%N/A-7.64Hold$6.31
Apple (AAPL)$319.23+0.5%0.96%26.94Hold$278.39

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