Evercore ISI Reiterates Outperform on Apple, $365 PT
Evercore ISI analyst Amit Daryanani reiterated an Outperform rating and $365 price target on Apple (NASDAQ: AAPL).
“ALL YOU NEED TO KNOW: According to a Bloomberg report (link here), Apple is preparing to launch Apple Upgrade, a new device leasing program backed by Klarna that is expected to begin on July 28.
The program will support most iPhone, Mac, iPad and Apple Watch models and will at least initially be available in the U.S.
Bloomberg reports that the new program will effectively replace new enrollments in Apple’s current iPhone payment programs, including the iPhone Upgrade Program and standard financing, with Apple positioning the new offering as a way to lower consumers’ monthly payments versus existing financing options.
This comes shortly after Apple raised prices across Macs, iPads and other devices by $100+ in response to rising memory costs, and ahead of what we expect could be a similar magnitude price increase with the September iPhone launch.
In addition, we expect Apple to release its first foldable iPhone, with a starting price likely above the current highest-priced iPhone Pro Max configuration.
The program will likely function like a lease/subscription, with 24-month terms for iPhone and Apple Watch and 36-month terms for Mac and iPad.
Bloomberg adds that users can pay off the device early, upgrade early, keep it at the end of the term, or return it, though certain transactions may include additional fees.
Notably, the Apple Upgrade will not include AppleCare, while certain devices (largely lower-priced/entry-level products) such as the Apple Watch SE, entry-level iPad, iPhone 16 and MacBook Neo will not be eligible.
Net/Net: This shift in Apple’s financing strategy should help lower the monthly payment hurdle for consumers at a time when device ASPs are moving higher.
The lower headline payment appears to come from the lease-style structure, where customers are not necessarily financing the full device value over the term, along with the fact that AppleCare is no longer bundled into the program.
Just as importantly, partnering with Klarna enables Apple to offer a more subscription-like upgrade path across devices while shifting the financing responsibility to a third party.
Sticking with our OP and $365 target.”
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