Apple Inc. (NASDAQ:AAPL) is about to enter a period of massive growth, and the firm’s stock price could go as high as $170 as a result. That’s the opinion of Kulbinder Garcha, a Credit Suisse analyst who studies Apple’s financial position. Mr. Garcha, and a lot of others on Wall Street, are betting on Tim Cook’s firm to change its trajectory later this year.
Investors in Cupertino’s most famous firm have been worried that revenue growth will slump as the smartphone market gets saturated. Mr Garcha, contrarily, thinks that the next iPhone release will push Apple Inc. (NASDAQ:AAPL) into a “super-cycle” of increased growth over a multi-year period. That’s precisely what those with money in Apple stock want to hear.
Apple iPhone 8 brings major changes
Mr. Garcha reckons the revenue increase will come from two sources: an increase in sales volume and an increase in price.
He predicted “Given its affluent user base, a significant feature upgrade, limited price elasticity shown so far, as well as Samsung’s higher pricing points of the S8 devices, we believe our ASP assumptions could prove conservative at $676/$704 for CY17/CY18.”
He’s basing predictions that Apple Inc. will both sell more and at higher prices on information from east-Asian supply chains. The research at Credit Suisse “indicates 112mn iPhone 8 builds” in the second half of 2017. Somewhere between 55 and 60 percent of those are coming with an OLED screen. That upgrade is expected to drive price increases in September.
The price rise, along with the increased demand for a phone with new features and a new design, could drive higher growth for years to come. After iPhone sales growth flattened out in recent years, that’s exactly what Wall Street is looking for from Tim Cook.
Apple Inc. stock marches forward
Apple Inc. (NASDAQ:AAPL) stock has increased in value by more than 25 percent since the start of 2017. The firm’s plans to make big changes to its iPhone design appear to be driving that increase. None of the firm’s “side projects” from Macs, to cars, to Homepods, are adding all that much to earnings. That’s the number, after all of the noise, that traders care about.
Mr. Garcha’s $170 price target isn’t the biggest on Apple, but it follows the logic of others with grander targets. Brian White of Drexel Hamilton has a target of $202 on the firm’s shares.
He wrote, in a May report, that “Apple’s valuation has been depressed for years as investors grew concerned that Apple would fall victim to the missteps of consumer electronic companies of the past. However, Apple has proven its resilience through its unique ability to develop hardware, software and services that work seamlessly together. We believe this positions Apple very well to capitalize on the trend toward more “things” becoming a computer.”
Mr. White reckons that Apple stock “remains among the most underappreciated stocks in the world.”
There are a lot of people holding on to the stock who agree with Mr. White and Mr. Garcha. On this morning’s market, however, there isn’t much appetite to bet on the “super-cycle.” At time of writing Apple stock was up very slightly on the pre-market. Shares closed on Wednesday at $146.59.