Analyst Note| Abhinav Davuluri, CFA |
Apple reported fiscal third-quarter results ahead of our expectations led by the iPhone segment. The firm did not provide guidance the last five quarters and once more refrained from offering specific financial expectations due to uncertainty regarding COVID-19. Apple’s iPhone revenue grew 50% year over year to $39.6 billion, thanks to the new 5G iPhone 12 family. Although we anticipate strong double-digit iPhone growth in 2021, we think growth rates will moderate in the coming years as the 5G upgrade cycle matures. We are raising our fair value estimate for narrow-moat Apple to $124 per share from $115 as we incorporate a stronger near-term outlook due to the current 5G iPhone cycle and ongoing work- and learning-from-home dynamics bolstering Mac and iPad segments. Nonetheless, we think shares are currently overvalued, as we think recent growth trends could be unsustainable past 2021.