Buy Apple Inc. (AAPL) Shares With iPhone 8 ‘Super Cycle’ in Mind: Analyst

Apple Inc (NASDAQ:AAPL) Apps

Shares of Apple Inc.  dropped 0.33% on Wednesday after Credit Suisse said that the iPhone 8 is likely to overshadow the company’s upcoming iPhone 7. Analyst Kulbinder Garcha said in a note that the iPhone 7 will prove to be a modest upgrade. He believes that the iPhone 8, however, would have significant innovations, and investor should buy Apple for the iPhone 8 “super cycle,” which could drive the company’s stock price more than 50% higher, CNBC reported.

Garcha reiterated an outperform rating and $150 price target on Apple’s stock, which is down 23.61% in the past 12 months. At the same time, the analyst cut 2017 EPS estimate by 5% to $9.67 a share because of disappointing iPhone 7.

Apple Inc (NASDAQ:AAPL) iPhone 7

“We conclude that the iPhone 7 will prove to be a modest upgrade, with significant innovations pushed out to the iPhone 8. … We note that iPhone units will still grow from this year’s base, but the recovery is likely to be more muted,” Garcha wrote in a note.

According to Garcha, the iPhone 7 will come with modest feature improvements, such as a slightly thinner case and more storage. He predicts that the iPhone 8 will include an OLED screen, full glass display, no home button, enhanced haptic feedback, wireless charging and improved camera, according to a report from Market Watch.

“These features, coming potentially in September 2017 and even if just a Pro version of the device, should drive an accelerated replacement cycle and draw in new users and should result in mix improvements,” Garcha said.

Stronger demand for the iPhone 8 would result in higher selling prices, according to the analyst, who estimates that average selling price for the iPhone 8 will be $667, compared to $653 for the iPhone 7.

A recent patent awarded to Apple Inc.  on Tuesday shows that a future iPhone could come with a wrap-around screen while another patent hints Apple’s rising interest in augmented reality (AR).

Apple Earnings

For the second quarter of fiscal year 2016, Apple reported a decline in its revenue since 2003. The company posted a quarterly profit of $10.5 billion on $50.6 billion revenue, versus a $13.6 billion income on $58 billion revenue in the same quarter last year.

The U.S. tech giant sold 51.2 million iPhones during the second quarter, versus 61.2 million in the same period a year ago. In China, the company’s most important market after the United States, sales were dropped by more than a quarter.

Apple and Carl Icahn

Billionaire investor Carl Icahn sold his entire stake in Apple on concerns about the company’s growth in China. Talking to CNBC’s Squawk Box, the activist investor said that he unloaded Apple’s stake because he was worried about the company’s growth in China. “I would get back in if I felt more secure about China” and he thinks that CEO Tim Cook is “doing a good job.” The latest filing submitted by Icahn to the U.S. Securities and Exchange Commission showed that the investor sold around 45.76 million shares of the company during January-March period. During that period, Apple’s stock gained around 3.60%.

Earlier, analysts at Mizuho Securities said that Apple should try to acquire a media company such as Netflix or Time Warner. The analysts said a research report that the company should stay away from making a buyout offer for Tesla Motors or Bayerische Motoren Werke AG (BMW), noting that a large acquisition would pose risks.

Shares of Apple Inc.  are down 9.49% in 2016. They have declined by 7.11% over the last three months and 12.08% over the six months.

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