By Sam Boughedda
Apple's (NASDAQ:AAPL) premium valuation could further expand, according to Evercore ISI analysts.
Evercore ISI currently has an Outperform rating and a $190 price target on Apple shares. While analysts acknowledged that investors have been somewhat critical of the firm's recent bullishness on Apple, they maintained their positive stance on the stock.
"Effectively, across different valuation metrics AAPL trades at a premium to the group though we think investors are largely focused on EV/EBITDA (AAPL @ ~38% premium), EV/FCF (AAPL @ ~11% discount) and to a lesser degree on P/E (AAPL @ ~25x FTM P/E)," the analysts wrote. "Numbers would suggest there is a notable premium when looking at EV/EBITDA, with Apple commanding a higher multiple vs. peers except Microsoft."
"However, we would argue that, in the current macro backdrop, AAPL's premium is not only justified but could further expand – given premium efficiency metrics (ROIC, ROE, etc.) and solid FCF + capital return (no ~$30B capex plan, no outsized SBC, no massive layoffs, etc.)."
Analysts said their firm's analysis implies AAPL deserves to trade at a premium valuation reflective of a higher operating efficiency in their business model, a substantially more favorable capital allocation program, and a more consistent and less volatile execution.
"For example, AAPL never hired aggressively through the pandemic and doesn't need to go through extensive headcount reductions, unlike peers," they added. "Net/Net: We think Apple deserves a premium to this peer group."