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Apple (AAPL) Stock Valuation Unlikely to Expand, Says Analyst


Apple’s (NASDAQ:AAPL) risk/reward profile looks balanced at current levels, at least if you ask Nomura analyst Jeff Kvaal. With shares flirting at record-high levels, Kvaal reiterates a Neutral rating on AAPL, with a price target of $175, which represents a potential downside of 9% from where the stock is currently trading.

Kvaal wrote, “We believe Apple is set for a healthy F2H as unit trends prevail and services checks indicate continued 30% YoY growth for now. We consider these factors well understood and expect an in-line F3Q print and F4Q guidance. Further out, we expect the 2019 iPhone line-up to help units grow a modest 2.5% and for ASPs to not be as robust as the iPhone X cycle.”

However, “Apple’s near-record-high valuation of 15x suggests that the probability of multiple expansion is low. Supercycle unit growth from 2015 and significant ASP increase similar to the iPhone X cycle are unlikely to recur over the next two years. Strong growth in Services and Other Products remains a small contributor at 18% and 7%, respectively. Our $175 TP is based on a cross-cycle average of 12.5x to our above-consensus CY19E EPS of $14.00 (Street: $13.16). Our SOTP analysis also shows a fairly valued Services business assuming a 2x hardware sales multiple. For example, Netflix trades 9x sales and Spotify trades 3x sales. We suspect the stock price have largely held up as Apple executes its buyback plan.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Jeff Kvaal has a yearly average return of 18.8% and a 61% success rate. Kvaal has a 28.8% average return when recommending AAPL, and is ranked #383 out of 4842 analysts.

If we turn to the Street in general, we can see that Apple stock has a Buy analyst consensus rating. In the last three months, AAPL has received 14 buy and 11 hold ratings. These analysts have an average price target on the stock of $201.80, which suggests a 5% upside from current levels.

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