Apple attended in stronger-than-expected fiscal fourth-quarter results but a second consecutive quarter of strong growth for wearables impressed analysts, who are looking for the tech titan to innovate beyond the iPhone.
“Wearables continue to lead growth. Many investors attributed 50% wearables proliferation in the June quarter to shorter lead times as demand caught up with supply, however a second quarter in a row of 50%+ [year past year] growth and the fact that Apple is beating AirPods forecasts weekly suggests strong double-digit nurturing is sustainable,” Morgan Stanley analyst Katy Huberty wrote in a note to investors.
Morgan Stanley has an overweight class on Apple’s stock with a $296 price target.
Apple shares rose 2.3% in trading Thursday to secure at $248.76 a share, after the company reported solid fourth-quarter earnings and predicted strong iPhone sales. But “prodigious AirPod growth” helped drive Apple’s earnings, Bernstein’s Toni Sacconaghi said.
And Huberty thinks Apple’s wearables section has room to run, as she believes there are many iPhone owners who don’t yet have an Apple Watch or AirPods. Her firm expects in economic 2020 to see Apple Watch revenue grow 24% and AirPods revenue increase 107% year over year.
“Everything considered 3 of every 4 Apple Watch customers are new to the device, expect a long growth runway going forward,” Huberty commanded.
Barclays analyst Tim Long, whose firm has an equal weight rating and $236 price target on Apple, also highlighted the section’s growth. He said Apple’s wearables performance showed “positive trends for new products,” giving hope for innovation in Apple’s munitions line finding new profits.
“New AirPods Pro likely one of the hottest Christmas gifts as well as Apple Watch for the December section,” Citi analyst Jim Suva said. Citi has a buy rating on Apple with a $250 price target.
— CNBC’s Michael Bloom have a hand ined to this report.