Analyst Note| Abhinav Davuluri, CFA |
Apple reported fiscal first-quarter results ahead of our expectations led by the iPhone segment. The firm did not provide guidance the last three quarters and once more refrained from offering specific financial expectations due to uncertainty regarding COVID-19. Apple’s iPhone revenue grew 17% year over year to a quarterly record $65.6 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. We are raising our fair value estimate for narrow-moat Apple to $98 per share from $85 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.