VIDEO: Revisiting Our Apple Price Target After iPhone Update
This week we'll be looking for the September Flash PMI, comments from Jerome Powell and key earnings.
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In today’s Portfolio video, Chris Versace lays out the Portfolio’s roadmap for the week ahead, which includes the September Flash PMI report; Federal Reserve Chair Jerome Powell taking the stage on Tuesday; and quarterly results from Micron MU, Accenture ACN and Costco COST.
He also runs through the initial teardown analysis of Apple’s AAPL new iPhone models and discusses why it’s a positive for one of our chip holdings. Chris also explains what we’ll be looking for to revisit our AAPL price target, one the shares are quickly approaching.
Transcript
CHRIS VERSACE: Hey, everyone. Chris Versace here, Monday, September 22. And we are barreling toward the end of the current quarter. That's right. We have seven trading days left, including today. And so far, as we know, September, it's been a pretty good month for the market bucking the historical trend. And it's also, as we've seen, been an extremely good one for the portfolio. And we discussed a lot of that in Friday's weekly roundup. And if you missed it, I have to say you should go back and take a read.
Take your time. Digest it. In that missive, we will share that we discussed how the S&P 500 and the Nasdaq Composite closed last week in overbought condition. Again, as we like to look at based on their relative strength index or RSI levels, both were above 70. In that alert, we also talked about how the Fed penciled in one more rate cut for this year than it did back in June, still less than the total of six the market was looking for in 2025 and 2026.
But again, as we talked with you last week, we did not expect the Fed to go big. We continue to think they might be frontloading some rate cuts, given some softness that we saw in the labor market of late, but also those big revisions we saw for the 12 months ending in March. We also discussed how outside of the labor market data, the economy is holding up arguably better than expected based on the rolling GDP forecasts from the Atlanta Fed as well as the New York Fed nowcasting model.
We've also seen-- and this is important for us. We've started to see second half EPS expectations for the S&P 500 inch their way higher. Nothing demonstrative, nothing huge. But if you remember back in August, we said we're going to be looking for a potential inflection point in earnings expectations for the second half of the year, as companies discussed the current quarter environment during the recent conference season. And again, coming out of that now, we have seen those numbers start to inch their way higher.
And that's important in our view because given where the market is, when we look at the PE multiple that it's trading at, high 24s or depending on where we are, perhaps, even touching 25 times forward expectations as in 2025 expectations, that's pretty stretched. So for the market to move demonstrably higher from here, we will need to see further positive revisions and earnings expectations. Now, some folks are already starting to call for that. I think it was Wells Fargo last week that raised their S&P 500 target to $6,800 from $6,600.
If you take a look at where we closed last week, you would say, oh, it's not all that big. And it's not. But remember that we are barreling toward the end of the current quarter, which means we're going to get some big data. And I want to talk about that as we transition the conversation into our roadmap for the week ahead. And that really begins tomorrow, Tuesday. And I say that because we will get the flash September PMI. That, as we know, is something that we will track very closely.
It's the first hard look of the month. And this time around, given what the Fed said last week about the potential for two more rate cuts, but also the tone of the economy and what that could mean for the upcoming earnings season-- that's right. We are right around the corner from the September quarter earnings season. So that report, more so than usual, is going to be very important. We will be breaking it down as we get it, focusing in on what does the headline say for manufacturing and services, of course.
But more beneath the headline, what does it tell us about the pace of job creation in the month of September? Did it pick up compared to August, compared to July? That will be key. But also too, what is it saying about input-output prices tipping the hand of what we could see when we move into early October with the ISM September PMI report? So that's going to be pretty important. But also tomorrow, yes, we will start to get some other Fed officials making the rounds after last week's policy meeting.
But we will also be hearing from Fed Chair Jerome Powell around noon-ish Eastern Standard Time tomorrow. Now, why is this important? From time to time, Powell does speak within a relatively short period of time after a Fed policy decision. Sometimes he offers some very sobering comments that have, let's just say, taken some of the excitement out of the market based on what the market thought it heard. So we will want to pay close attention to what the Fed heads have to say over the coming days, but especially to what Powell has to say tomorrow.
Does he walk anything back? Does he reiterate the notion that the Fed is moving towards a rate cutting cycle? So we're going to have to pay very close attention to all of that and break it down. And we will be doing that for you obviously in some alerts tomorrow afternoon. Also tomorrow afternoon, we do have Micron reporting. This is going to be important. Again, we're not invested in Micron. But what are they saying about memory demand for data center smartphone NPC?
Do they update their second half of the year forecast with a positive fashion? If they do, depending on the segment, that will be very positive for our shares of either NVIDIA, Marvell, Apple, Qualcomm, or some others. So tomorrow is going to be a big day for us. Wednesday, we've got quarterly results from Accenture and then Thursday from Costco. Of course, we'll be breaking that down. With Costco in particular, we'll be focusing on yes, what is the volume of merchandise being purchased?
But we're also starting to see the positive flow through of last year's membership fee price increase. That's a key, key driver of a very big piece of Costco's pre-tax income to the extent that we are starting to see that flow through. I think we'll see earnings expectations move higher for Costco. And that could be a catalyst to get the shares working. I will share that we are seeing some other kind of anecdotal comments about the consumer continuing to be relatively cash strapped.
There was an interesting article in The New York Times over the weekend about how Hamburger Helper is making a comeback as folks contend with higher food prices. I believe the article said that on a four-year look back, average food prices are 20% higher. That is obviously going to be hitting consumers, especially lower-income consumers. Bodes arguably well for our positions in Costco and TJX. Now, I do want to end today's video on a quick word about Apple.
New iPhone models went on sale on Friday. And so far, the demand picture looks favorable with indications Apple is going back to its suppliers to say, hey, we need to ramp production a little more. We will see how this plays out. But I want to focus in on the tear down for the new iPhone 17 and iPhone 17 Pro models. They have Qualcomm's chips inside of them. And if you remember, there was some concern about Qualcomm losing Apple as a customer. Again, that is expected to happen over time.
Our view was that at least for this year, Apple would be sticking with the Qualcomm chipsets in its upper end phones. And sure enough, it did. The iPhone Air, the new model, the extremely thin model that we'll talk about more in a second, that is using Apple's proprietary modem pretty much the same that it used with its lower end iPhone 16 phone. As it relates to the iPhone Air, we are seeing numerous articles confirming something we talked with you last week.
That is that the iPhone Air is kind of a gateway product of sorts for the iPhone Foldable. The thinking is that it will be two iPhone Airs that hinge together. Obviously, that would be good news for our position in Universal Display. And we're also seeing reports that Apple is running a test production line for that foldable product. So we'll be tracking that very closely, as you can imagine. But back to the teardown analysis.
While Qualcomm remains in the higher end phones, those higher end phones and the other ones, the iPad Air in particular, they do contain a new Apple networking chip that is for Wi-Fi and Bluetooth. What this means is Apple is replacing a prior chipset from Broadcom. Now, as we think about all of this, we are going to see how demand shakes out. Remember, last year, the iPhone 16 family of products were expected to jump start a rather large upgrade cycle. And it didn't necessarily play out.
I think that we can tie that back to issues regarding Apple Intelligence, and the push out for the AI-enabled Siri. And Apple is expected to make progress on that in the coming quarters. That could help facilitate this upgrade cycle that we've been waiting for. So from our perspective, we're going to wait until we get past the initial Apple faithful weekend and see how demand shakes out. And we'll be doing this with an eye towards revisiting our Apple price target. Our price target is $250. The shares closed last week at $245 and change.
I do think that we could see some folks come out citing the early, early demand for the new iPhone 17 family of products. But we would want to confirm that there is that this fervor, if you will, has legs. And we're prepared to upgrade our price target when the time is right. So with that, we'll leave it there with today's video. But we will share that we've got a lot more coming your way today, including our next set of office hours, that's right, 4:00 PM to 5:00 PM in the forum. Come ask your questions. We'll bring our answers. And we'll see you there. Thanks for watching.
At the time of publication, TheStreet Pro Portfolio was long COST and AAPL.
