David Vogt is a believer in the potential of the Apple iCar.
The UBS analyst on Wednesday upped his rating on
shares to Buy from Neutral, setting a new target of $142, up from $115. The call is directly tied to Vogt’s enthusiasm for the company’s widely rumored plan to start making Apple branded autos. (Apple hasn’t said a thing about cars so far.)
Apple rose 2.5% to $122.88 in recent trading.
Vogt writes in a research note that the upgrade reflects two primary factors. One, ongoing strength in the iPhone, which he says is benefiting from better average selling prices, as consumers continue to show a preference for the high end of the iphone-12 line. And two, he says the higher target reflects “the real option value of Apple’s likely entry into the auto market,” a factor he thinks isn’t reflected in the company’s share price.
“Our analysis of the auto market and Apple’s multi-year investment in the industry (self-driving car licenses and LiDAR patents) suggests to us Apple’s auto optionality is worth at least an incremental $14 a share,” he writes.
Vogt thinks the company will enter the electric-vehicle market and take at least 5% of the global market. He thinks the auto market will be almost 100% electric in 10 years, opening up a market with more than 90 million units to new entrants like Apple. “Our base case assumes Apple captures 8% of global EV units in 10 years with operating margins approaching 15%,” he writes.
On the iPhone front, Vogt is no believer that we’re seeing a “supercycle,” but he slightly lifts his outlook for unit sales to 220 million for the September 2021 fiscal year (up 5 million) and to 215 million for fiscal 2022 (up 10 million). He notes that in the three years prior to fiscal 2019, Apple averaged 215 million iPhone units a year.
“From a timing perspective, our upgrade should also capture the relative and absolute outperformance that typically accrues to Apple shares 180 days prior to fall iPhone launches.” Vogt notes that since 2013 (but excluding 2020) Apple shares have rallied 15% in the six month window ahead of Apple’s annual September launch of new phones. (Last year the fall launch was delayed by a month due to production issues related to the pandemic.)
Write to Eric J. Savitz at [email protected]