Apple Inc. (NASDAQ:AAPL) shares may surge in 2017 for five very good reasons, as per Citi Research analyst Jim Suva. With a “Buy” rating, Citi Research has set a $130 target price on the stock, representing around 15% upside.
Five potential catalysts
First, Suva notes that the upgrade cycle with the iPhone 8 launch will be much stronger compared to the previous two upgrade cycles. Further, Suva predicts that iPhone shipment will surge at least 7% in fiscal year 2018. “We believe iPhone installed base upgrades will take a step up with the launch of iPhone 8,” Suva wrote.
Next reason that will influence the stock is tax benefit from the reduction in corporate taxes and cash repatriation. Suva talked about how Trump’s proposal to reduce the U.S. Corporate tax rate to 15% from current 35% will contribute 6% to Apple’s earnings per share. If the firm exercises 25% of any repatriation tax to buy back the stock, it will add an additional 10%.
In the research note, Suva stated that Apple Inc. (NASDAQ:AAPL) will reap maximum benefits from Trump’s tax reform. The iPhone maker is very well positioned to benefit from both potential tax reform – a repatriation tax holiday and a lower corporate tax rate.
Third reason as per Suva is Apple’s loyal customer base will boost the service revenue from subscription such as $9.99 per month for Apple Music, or $5 per month for iCloud.
Fourth is “Enterprise push mid term, Applewood longer term.” Suva notes that Apple is also positioned well to sell iPhones, iPads and Macs to businesses such as IBM and Deloitte. Talking of Applewood – Apple’s nascent India effort, Suva said the US firm will eventually grow in India, if the country can install high-speed wireless networks that Apple devices require.
Last reason as per analyst is that shares are trading at a slight discount to their 4-year median multiples despite improving fundamentals. Apple shares are underperforming since the start of 2016, surging 7.6% compared to S&P500 return of 10.4%.
Citi analyst is not expecting any surprises in the coming two-quarters for Apple.
Expect an October like rally for Apple
Separately, a few days back, Todd Gordon of TradingAnalysis.com, speaking on CNBC’s “Trading Nation,” said that he likes Apple Inc. (NASDAQ:AAPL) at its current trading levels, despite its recent “strong uptrend.” Gordon expects the stock hit highs seen in the previous months.
The trader expects an October like rally, taking the stock higher to about $118 per share. “Apple is set up technically well, and it seems to be leading the Nasdaq just a touch here today,” the expert said.
On Tuesday, Apple shares closed up 1.67% at $115.19.
This article is not intended as individual or reader-specific investment advice. Do your own research and consult a financial professional, if necessary, before investing in anything.