Barclays has increased its price target on Apple Inc. (NASDAQ:AAPL) to $655, saying that the price point shows ‘respect’ for the company’s stock momentum in the second half of 2014. The previous price target of $590 was topped by Apple this month after posting strong results for the second quarter of 2014.
Apple better positioned for second half
Barclays analyst Ben A. Reitzes noted that Apple Inc. (NASDAQ:AAPL) did not post the “widely expected” low earnings in the first half of the year, which positions it strongly for the second half of 2014.
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Apple Inc. (NASDAQ:AAPL) shares have increased by 17% since the last quarterly numbers, compared to just around around 2% for the S&P 500 during the same period. Furthermore, according to analysts, the shares of the iPhone maker will not stop until the mid $600s in the wake of new product launches. Apple stock traded upwards in Wednesday afternoon trading, galloping towards another 52 week high. On Tuesday, the shares traded at a one year high, given investors were excited about next week’s Worldwide Developers Conference (WWDC) as well as the upcoming 7-for-1 stock split.
According to Reitzes, five factors are taking the stock to a higher level, and the first one is strong iPhone sales driven by surprising sales in overseas market, where the iPhone is becoming increasingly popular.
Bigger screen to boost sales
Another catalyst that Reitzes mentioned is a higher iPhone mix, which will further enhance the gross margin currently at 39.3%, above Wall Street expectations of around 38% for the quarter. The third reason is that Apple Inc. (NASDAQ:AAPL) has expanded its capital allocation plan, adding another $30 billion, which is also appealing to investors. Reitzes believes that sales of the iPhone will increase in the second half of 2014 owing to the demand for big-screen phones and rumors that Apple will launch the two larger handset iPhone 6 models.
The final catalyst cited by Reitzes is that executives at Apple Inc. (NASDAQ:AAPL) are talking about the monetization of iTunes. This strategy of increasing revenue sits well with the investors. as it would ensure recurring fees along with enhancing revenues from iTunes.
According to Eddy Cue, Apple Inc. (NASDAQ:AAPL) senior vice president of Internet software and services, the products in the pipeline for this year are, “[the best] I’ve seen in 25 years.”