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Sept. 28, 2019, 12:40 p.m. EDT

Wall Street is underestimating how much money Apple will make off 5G, says Jefferies

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By Barbara Kollmeyer, MarketWatch


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Where’s the Apple hype?

With just a few days left in the third quarter, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -0.05%  is looking at a return of 1.3%, which would be its weakest quarter since December 2016.

That’s a bit behind a 1.7% return for the S&P 500 in the same period. Quarterly losses for Amazon /zigman2/quotes/210331248/composite AMZN -1.40%  , Netflix /zigman2/quotes/202353025/composite NFLX -3.05%  and Facebook /zigman2/quotes/205064656/composite FB -0.66%  probably haven’t helped the index. One Netflix bull came out with a pretty bearish assessment of the video streamer Tuesday.

Opinion: Amazon, Netflix and Apple shares are no longer beloved by the average investor

However, Apple /zigman2/quotes/202934861/composite AAPL +0.96%  — is up 10% for the quarter so far at $218, and 38% year-to-date, likely getting some help from the iPhone 11 rollout. But Tim Cook’s company is under-appreciated says our call of the day from Jefferies analysts.

Equity analysts Kyle McNealy and George Notter have just come out with a recommendation for investors to buy Apple, and a target for shares to rise to $260. They say Wall Street fails to appreciate how much the company stands to benefit from fifth generation cellular network technology, which basically promises faster data connection for consumers.

“In our view, current expectations for Apple’s first 5G iPhone lineup are too low. They underestimate Apple’s competitive position for 5G devices,” they said.

They expect better iPhone sales than Wall Street, where current consensus forecasts call for 190 million iPhone units sold in fiscal year 2021 — seen as a big year for 5G devices. That’s 9% below the 6-year unit shipment average for iPhone product cycles, said the analysts, who expect sales of 208 million for 2021.

They list a few reasons for their optimism: Most Apple customers will need a 5G upgraded device; the industry marketing push behind 5G will be huge with more product differentiation versus prior cycles; world-wide smartphone penetration will get higher and Apple has also expanded its own mid-range offerings.

Read: Loss-averse investment managers help you cut risk by diversifying away from index funds

The market

The Dow /zigman2/quotes/210598065/realtime DJIA +0.33%   , S&P /zigman2/quotes/210599714/realtime SPX +0.07%    and Nasdaq /zigman2/quotes/210598365/realtime COMP -0.05%   are moving higher on trade-talk hopes. Oil and gold /zigman2/quotes/210039486/delayed GCZ19 +0.13% are down, while the dollar /zigman2/quotes/210598269/delayed DXY -0.01% is flat.

Read: Why a sideways stock market could indicate the highs are yet to come

European stocks /zigman2/quotes/210599654/delayed XX:SXXP -0.26% are mixed, while Asia /zigman2/quotes/211618636/realtime XX:ADOW -0.50% had a similar session. Drawing some attention, the People’s Bank of China governor talked down rate cuts.

Read: Why discord at the top is threatening the ECB’s capacity to act

The chart

Michael O’Rourke, chief market strategist at JonesTrading, has been tracking the percentage of days the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.07%  has closed in positive territory — 58% so far in 2019. That helps explain the 19% year-to-date gain we’ve seen for the index.

/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
8,482.10
-3.99 -0.05%
Volume: 1.99M
Nov. 13, 2019 5:16p
loading...
/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 1,753.11
-24.89 -1.40%
Volume: 2.93M
Nov. 13, 2019 4:15p
P/E Ratio
77.62
Dividend Yield
N/A
Market Cap
$878.38 billion
Rev. per Employee
$359,671
loading...
/zigman2/quotes/202353025/composite
US : U.S.: Nasdaq
$ 283.11
-8.90 -3.05%
Volume: 9.23M
Nov. 13, 2019 4:15p
P/E Ratio
90.36
Dividend Yield
N/A
Market Cap
$128.93 billion
Rev. per Employee
$2.22M
loading...
/zigman2/quotes/205064656/composite
US : U.S.: Nasdaq
$ 193.19
-1.28 -0.66%
Volume: 11.01M
Nov. 13, 2019 4:15p
P/E Ratio
30.86
Dividend Yield
N/A
Market Cap
$540.86 billion
Rev. per Employee
$1.57M
loading...
/zigman2/quotes/202934861/composite
US : U.S.: Nasdaq
$ 264.47
+2.51 +0.96%
Volume: 25.82M
Nov. 13, 2019 4:15p
P/E Ratio
22.31
Dividend Yield
1.16%
Market Cap
$1165.03 billion
Rev. per Employee
$1.98M
loading...
/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,783.59
+92.10 +0.33%
Volume: 278.39M
Nov. 13, 2019 4:56p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,094.04
+2.20 +0.07%
Volume: 1.72B
Nov. 13, 2019 4:56p
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
8,482.10
-3.99 -0.05%
Volume: 1.99M
Nov. 13, 2019 5:16p
loading...
/zigman2/quotes/210039486/delayed
US : U.S.: Nymex
$ 1,465.20
+1.90 +0.13%
Volume: 27,086
Nov. 13, 2019 11:40p
loading...
/zigman2/quotes/210598269/delayed
US : U.S.: ICE Futures U.S.
98.36
-0.01 -0.01%
Volume: 0.00
Nov. 13, 2019 11:40p
loading...
/zigman2/quotes/210599654/delayed
XX : STOXX
405.86
-1.04 -0.26%
Volume: 0.00
Nov. 13, 2019 5:50p
loading...
/zigman2/quotes/211618636/realtime
XX : Dow Jones Indices
3,314.31
-16.73 -0.50%
Volume: 0.00
Nov. 13, 2019 11:50p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,094.04
+2.20 +0.07%
Volume: 1.72B
Nov. 13, 2019 4:56p
loading...
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