Apple stock has been rising and falling on iPhone 8 rumors and will continue to do so until after the phone hits store shelves, but what investors should be worried about right now is what comes after it. Management has promised a generous surge in services revenue, but it seems doubtful that will be enough to keep investors sated because, let’s face it. Selling services doesn’t sound nearly as sexy as coming up with the next hot gadget for sale.

iphone 8 apple stock
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Apple expects the iPhone 8 to be in high demand

It certainly sounds like Apple is expecting at least as big of a year for the iPhone as Wall Street is. DigiTimes reported today that the company’s chip suppliers will start stocking solutions for this year’s models, of which the iPhone 8 is expected to be one of three choices. Citing its own unnamed sources, the website added that chip makers will step up the pace of their inventory building between the end of the second quarter and beginning of the third.

According to DigiTimes’ sources, chip demand for this year’s iPhone lineup is expected to surpass 50 million sets in each quarter during the second half of the year. The sources also reportedly claimed that Apple is forecasting between 220 million and 230 million iPhone units this year. The website named Qualcomm, ADI, Cirrus Logic, Broadcom, NXP, TI and STMicroelectronics as being among the chip makers the company will use this year.

Apple has long been rumored to be planning to release three iPhone models this year, including the tenth anniversary edition iPhone 8 and the iPhone 7s and 7s Plus. DigiTimes didn’t mention any specific names, so the 220 million to 230 million unit range encompasses all of this year’s models, however many that ends up being.

Apple stock price target upped

Longbow analyst Shawn Harrison boosted his price target for Apple stock this week, and like so many other price target increases, his also has something to do with the iPhone 8. However, what’s a bit different is that he highlighted the phone’s average selling price and said that estimates look to be too low. Based on this view, he bumped his price target for Apple stock up from $150 to $162 per share and reiterated his Buy rating.

We’ve been hearing a range of rumored prices for the iPhone 8, and about the only thing we can glean from all the reports is that it will probably be even more expensive than Apple’s other iPhones. Some reports pegged the price at more than $1,000, although the reality of that began to set in as analysts realized that the average consumer probably won’t shell out that much for a smartphone—even one with an Apple logo on it.

Expensive iPhone 8 not factored in?

Harrison is forecasting 242 million iPhone units for fiscal 2018, which is even more than what DigiTimes reported that Apple’s chip suppliers are preparing for. He used this number and built models using price points of $849 and $949 for the OLED-equipped iPhone 8, assuming that at least 95 million of the iPhones sold in fiscal 2018 end up being the OLED model.

The Longbow analyst said that based on these numbers, an $849 iPhone 8 would result in an average selling price of $746, while consensus stands at only $667. Of course, this is before adjusting for the higher bill of materials for the new model, as he noted that usually, changes to the form factor result in a mid- to high-single digit increase, and that doesn’t include the fact that an OLED display will add further to the expense. Additionally, memory prices have risen 30%.

Apple stock on par with the S&P?

Harrison also noted that the last time Apple stock traded on par with the S&P 500 on a one-year forward P/E basis was following the launch of the iPhone 6. His price target of $162 for Apple stock would place it at the same relationship to the index, which is, of course, by design, given the growing number of comparisons we’re seeing with the iPhone 6.

He feels that Apple stock is currently undervaluing a return to growth for the iPhone and an ever-growing subscriber base.

Shares of Apple stock ticked lower during regular trading hours on Wednesday, falling by as much as 0.47% to $140.55.