J.P. Morgan raised its price target on Apple's (NASDAQ:AAPL) stock expecting the company's shares will rise 21% as sales of its new line of iPhone are “stronger than muted expectations.”
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"We are modestly raising our iPhone volume forecasts and expect investor sentiment on AAPL shares to improve materially given the firm's ability to drive upward revision to volume expectations despite the 2019 product cycle largely considered to be a muted one," said one Morgan J.P. Morgan analyst.
J.P. Morgan raised its price target on Apple to $265 a share from $243 a share. The firm has an overweight rating on the stock.
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J.P. Morgan forecasts one million more iPhone sales than it previously expected during the current quarter, plus three million more iPhone sales than expected in the final quarter of the calendar year.
"In addition to a raise in volume expectations for 2019 product cycle, we are also increasing calendar 2020/2021 volume expectations led by stronger adoption of 5G enabled iPhones expected to be launched in September 2020."
J.P. Morgan expects Apple will sell 198 million iPhones with 5G service in 2020 and 200 million in 2021.
Apple With $102 Billion Cash And Buyback Stock Program
Apple entered last quarter with over $102 billion in net cash and a total cash balance of $211 billion. The tech giant could go a year without generating any free cash flow and still continue its aggressive capital return program.
Despite extremely aggressive capital returns in the last few years, Apple has only cut the net cash position from $141 billion at the end of FY15 to $102 billion now. The prime reason is that the tech giant generates ~$60 billion in annual free cash flows that contribute substantially to the inability of Apple to reach a cash net neutral position quicker.
Another key is the value of the share buyback to shareholders. Investors don't just want Apple buying shares because the company has spare cash on the balance sheet. The company saving the money for a rainy day didn't harm the stock one bit over the decade prior to starting the capital returns in FY12.
From a pure numbers standpoint, Apple spending $20 billion per quarter on share buybacks at the following stock prices has the following impact with 4.6 billion shares outstanding: