iPhone 12 should start the road to recovery for Apple: analyst

On Tuesday, Wedbush analyst Dan Ives raised his price target on Apple to $350 (from $335) while maintaining an ‘outperform’ rating, on the belief that that the eye of the storm is in the rear view mirror for the tech giant. The analyst thinks the iPhone 12 should start the road to recovery, adding that a major savior for Apple has been the rock solid services business. The Final Round panel discusses what’s next for the company.

Video Transcript

MYLES UDLAND: It's time now for our call of the day. Today, we are looking at Wedbush's latest on shares of Apple, raising their price targets to $350 per share on the tech giant stock, trading right around $315 per share in afternoon trading, $316. The stock is just 3.5% off of its record high.

And I think, Jen, the most interesting part of Dan Ives' note here, and he's calling this the road to recovery for Apple, he's saying that the services business is a $500 to $600 billion unit within Apple, so basically valuing services at 10 times revenue. We're edging closer to the full sum-of-the-parts analysis on Apple. And I-- kind of one wonders where this heads, as we think about what the next demand cycle for potentially 5G-enabled iPhones looks like and so on.

JEN ROGERS: Yeah, I nearly fell out of my chair reading the part about services. First of all, Teflon-- Teflon-m like services business. Remember when services was the big theme that we had, you know, last year, the first half of last year, that that was going to be what was driving it? And then we all realized, oh, actually, the iPhone is really important. But yeah, services at $500 to $600 billion in here. He thinks that it's really been a key to their performance during this horrific time period.

We've got stores opening back up. Look for that. Myles, I've got another takeaway in here. Because when you think, look, road to recovery, what's coming up? What's going to be big for Apple? It's 5G. But you know what? In here, our scenario assumes the 5G iPhones do not get released this fall. So looking like they don't even think that they really need it with this price target getting raised to $350.

MYLES UDLAND: You know, I've always wondered where, you know, 5G iPhones really fit into the entire calculus for Apple, right? Everyone's been very excited about them. But Dan Roberts, there's always a new reason that the supercycle is about to happen for Apple. And yet, the reality is, they make great phones, and a lot of people buy them and they pay a lot of money for them. And all these, you know, side narratives, in many ways, are never as compelling as, like, wow, people bought a lot of iPhones, and that's all they keep doing.

DAN ROBERTS: Right, and I don't want to necessarily start again our perennial discussion Melody, Jen, Myles, and I have had this show during quarantine about whether it will matter that the 5G iPhones will be delayed. Will people come in droves and buy them when they finally come out? I think most of us come out on the side of yes, people will buy them when they come out.

But it is funny. I'm with you guys-- the thing with the [INAUDIBLE] all right, Apple doesn't necessarily really need a recovery that much. That goes a little far. I mean, yeah, there are some dark clouds here in the delay of the iPhone. But I don't think anyone really can justifiably right now be that bearish on Apple because the new iPhone will come eventually, and I think people will upgrade.

And then anecdotally, I always use the example of myself. And I wrote this about a year ago, and it was fun to read the comments teasing me. But I wrote about the fact that in many ways, I'm frustrated by my iPhone sometimes. Sometimes I'm not satisfied with it. And yet, I can't imagine leaving the Apple ecosystem. I am a willing, self-aware Apple sheep. I'm locked in now.

And there's the occasional person, like Dan Howley, who says, oh no, no, divorce yourself from Apple. You'll love it, getting an Android. I don't think so. I couldn't do the green text messages, and I'm just too locked into the Apple interface. It's what I know. So I'm sure down the road, I'll buy another iPhone, even with my various complaints and gripes like battery life, for example.

MYLES UDLAND: Yeah, I mean, I remember being in, like, high school hearing about how Apple products actually suck and you could actually use things that were better. And I just don't care, honestly. I mean, I've just-- things-- the iPhone is fine. It's probably not perfect. It's probably too expensive. But it works, and just nobody has time, Melody Hahm, for really caring about every little spec of their device. Some people will, but it's clearly not a-- it's not a driver on the edge of consumer demand.

MELODY HAHM: This segment was brought to you by Apple and Tim Cook. I think there is some certainty to that, for sure. But just thinking about US, China tensions that we sort of are not talking about right now, even though those are still very much at play, and the fact that Tim Cook was able to use the Trump offensive and get most Apple products off of those lists and exemptions for those tariffs, I do wonder, as we emerge, hopefully sooner rather than later, out of coronavirus, whether those conversations will pick back up and whether the Chinese market will actually continue to surge in demand.

Because I think over the last couple of years, we've seen quarter after quarter that that either makes or breaks Cook's confidence, right? So I'm curious to see whether it will have a damaging impact, whether it's reputationally, because most are not as plugged and locked into the ecosystem overall, as we are.

MYLES UDLAND: Melody, what phone do you have?

MELODY HAHM: IPhone, Myles.

MYLES UDLAND: Just saying.

MELODY HAHM: I'm not saying that I don't have an iPhone and I don't like Apple products. I was just hearing it out of context, and I was like, yeah, we're all still bullish on this right now.

DAN ROBERTS: But I'm saying I don't like Apple products, but I still have them.

MYLES UDLAND: Right. Well--

MELODY HAHM: Yeah, exactly. It doesn't really matter how you feel. It's your purchasing power.

MYLES UDLAND: As everyone knows, I love to shill. So here we are, once again, getting it done during this segment. All right.