- Apple handily beat the $330 price target I gave it last may 10. I’m therefore raising my one-year PT to $388.
- There’s a global pandemic and yet AAPL touts a year-to-date price return of +19.09%. Its 1-year price return is +76.74%.
- Investors are bullish on the strong rumor that Apple will use its ARM-based processors on some of its next-generation Mac computer products.
- ARM-based Macs can help boost the computer segment of Apple. This will help further reduce Apple’s heavy reliance on iPhones sales.
- An ARM-based MacBook, iMac, and Mac Mini would be cheaper than Intel x86-based Apple computers. Catering to more sectors of buyers is good for Apple.
Apple’s (AAPL) stock has a great +76.74% 1-year price return. I am still endorsing AAPL as a buy. This stock handily beat the $330 price return I gave it last May 10. I am therefore giving my AAPL stock prediction a new 1-year price target of $388. Investors are very bullish on the long-running rumor that Apple will announce on Monday that it will use its own ARM-based processors for future macOS desktop computers and laptops.
Apple’s ARM-based Laptops
Microsoft (MSFT) has not been successful in its campaign to promote ARM-based Windows 10 laptops. However, the stronger brand power and the very loyal customer base of Apple will likely see ARM-based macOS computers achieve commercial success. This move could help Apple gain 8% of the global PC shipments. The chart below shows Apple ended Q1 2020 with just 6.9% market share in PC shipments/sales. Going forward, a touchscreen, ARM-based macOS could help Apple sell 4 million Macs per quarter again.
The most obvious benefit is that ARM-based laptops will be more compatible with iOS apps. The hundreds of thousands of iPad apps available will make students, home users, and business customers embrace ARM-based macOS computers. The upcoming scenario is that Apple will try to sell touchscreen-equipped macOS computers that cannot run legacy x86 software but they can run all available iOS apps. This could cannibalize sales of iPads but Apple is trying to get out of its comfort zone. Experimenting with ARM-based Macs could help it grow its fast-growing Services segment.
Furthermore, the potential risk of losing iPad sales from releasing ARM-based MacBook laptops is acceptable. The Mac segment contributes more to the quarterly revenue of Apple. As of Q2 ’20, Mac sales contribute 9.18% to Apple’s quarterly revenue.
Apple’s Q2 revenue was $58.31 billion. Mac sales therefore contributed $5.35 billion. Selling ARM-based, touchscreen macOS laptops and desktop computers can boost this to $5.8 or $6 billion/quarter. Sad but true, ARM-based, touchscreen-equipped macOS computers could seriously derail the growing sales of Microsoft’s Surface-branded laptops.
Apple Has Capable Processors
Going forward, Apple is likely ready to release a macOS operating system that can run natively on its own A-Series of ARM-based processors. Apple has had many years designing its own ARM processors. The currently available A-series A12Z Bionic System-on-Chip used on the 2020-era iPad Pro products can be competently used on ARM-based macOS laptops. The A12Z can outperform many Intel (INTC) Core i5 laptop processors used by Apple on its current MacBook products.
The next iteration of A12Z Bionic could even compete against Intel’s Core i7 processors for laptops. This is not really necessary. My takeaway is that Apple will market its ARM-based Mac computers to non-heavy users like students and casual Microsoft Office 365-dependent employees.
Why Apple Deserves A PT of $388
My $388 price target for AAPL is reasonable. WalletInvestor’s AI has a higher price target of $395.84 for Apple’s stock. The current bull run of Apple is due to its fast-growing Services segment. App store sales, subscriptions, and other commissions are getting a big boost from COVID-19. The stay-at-home, work-from-home, and learn-from-home new normal under this global pandemic is boosting spending on iOS games/apps. More iPad and iPhone owners are also subscribing to Apple Music, Apple TV+, and other streaming entertainment services available at Apple’s iOS ecosystem.
My fearless AAPL stock prediction is that AAPL can rapidly breach $380 this year if it reports record revenue again for its Services segment for 3Q ’20 or 4Q ’20. 2Q’s revenue for Services was a record-setting, $13.35 billion. If third quarter ER produces a $14.5 revenue for Services, expect investors to push AAPL’s price to above $365.
Further, AAPL is still good value if you compare its fundamental ratios against Microsoft (MSFT). Yes, Apple is not a software leader but its Services segment is now big enough to make up for Apple’s almost zero presence in software industry. Going forward, Apple can eventually generate $15 billion/quarter from its Services segment.
AAPL’s forward GAAP P/E is only 28.23. This is lower than MSFT’s 32.51. The TTM EV/Sales valuation of AAPL is just 5.75. This is grossly lower than MSFT’s 10.28. This relative undervaluation of AAPL versus MSFT should convince us that AAPL can still set a new 52-week high this year. It might even go as high as $388 before 2020 ends.
Apple is a highly-profitable company with a giant pool of very loyal customers. ARM-based Mac computers will not repeat the commercial failure of ARM-based Windows 10 laptops. The more than 1 billion iPhone and iPad owners will lovingly embrace an ARM-based macOS laptop that comes with a touchscreen. The traditional Intel macOS computers will continue to sell among professionals and content creators. However, students and corporate employees will realize the better value proposition of a touch-enabled, ARM-based MacBook or iMac over the iPad Pro or Microsoft Surface 3/Pro laptop.
My buy recommendation for AAPL is greatly influenced by its bullish one-year forecast from I Know First. I expect AAPL to trade higher than $370 within the next six months. This stock will likely deliver my $388 PT before 12 months is over.
Exponential Moving Analysis of AAPL also says its momentum traders’ buy. AAPL recently dipped but its EMA numbers are still saying it’s a strong buy.
Past I Know First Success with AAPL Stock Prediction
I Know First has been bullish on the AAPL stock prediction in past predictions. The I Know First algorithm issued a bullish outlook on May 8, 2020. The algorithm forecast successfully predicted the movement of the AAPL stock and rose by 15.14% since then. See the chart below.
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