The upcoming iPhone 8 and the upgrade supercycle will help lift Apple Inc. (AAPL) to a trillion-dollar valuation by 2019, RBC Capital Markets analyst Amit Daryanani believes. In a research note on Monday, Daryanani noted that the iPhone maker could hit a trillion dollar valuation within the next 12 to 18 months, according to MacRumors.
How much will the iPhone 8 help toward a trillion-dollar valuation?
For the first time, Apple Inc. (AAPL)’s market cap crossed the $800 billion mark earlier this month. RBC analysts raised their price target for the stock from $157 to $168.
“In aggregate, we see a scenario where in the 2019 fiscal year, Apple Inc. (AAPL) sustains $12+ earnings per share and, assuming the valuation frameworks remains stable/improves, it should get AAPL stock toward $192–$195, which would equate to a market cap above $1 trillion,” the analyst stated.
Seth Klarman: Investors Can No Longer Rely On Mean Reversion
"For most of the last century," Seth Klarman noted in his second-quarter letter to Baupost's investors, "a reasonable approach to assessing a company's future prospects was to expect mean reversion." He went on to explain that fluctuations in business performance were largely cyclical, and investors could profit from this buying low and selling high. Also Read More
Further, the analyst believes that Apple Inc. (AAPL) has the potential to hit double-digit revenue growth year over year in the service category owing to “expanding installed base [of devices], increasing App Store sales within the current installed base, demand for cloud storage/compute services, and further adoption of Apple Pay.”
In the last quarter, Apple’s Services segment earned $7.17 billion, compared to $6 billion in the same quarter last year. CEO Tim Cook said during the earnings call that the Services segment is already the size of a Fortune 100 Company, and he expects revenue from the segment to double by 2020.
Analysts bullish on Apple Inc. (AAPL)
A few weeks back, Drexel Hamilton analyst Brian White raised his price target for Apple Inc. (AAPL) from $185 to $202, saying that Apple is among the “most underappreciated stocks in the world” and could hit a trillion-dollar valuation within the next year.
BMO Capital Markets’ Tim Long is also bullish on the iPhone maker and expects the stock to hit $170 per share. Long has an Outperform rating on the stock and a price target of $170, up from $150. In a note last week, Long noted that Apple’s stock is trading at a multiple that’s similar to where it was before the iPhone launch in 2014. And if the iPhone 8 upgrade cycle turns out to be even half as good as the iPhone 6 in terms of incremental units, then Apple’s earnings per share for 2018 could get a boost of 50 cents, Long believes.
Last week, another analyst also boosted his price target on Apple Inc. (AAPL)’s stock. Analyst T. Michael Walkley of Canaccord Genuity raised his price target to $180 from $165 earlier, citing an improved outlook for iPhone sales. In a note to clients, Walkley said that they expect a strong upgrade cycle for the tenth-anniversary iPhone, “as our surveys indicate strong consumer interest in and anticipation for new iPhones anticipated to launch in September.”
The analyst raised his 2018 iPhone sales estimate to 248 million, up from 242 million units, and his earnings per share estimate to $11.58 from $10.93. However, Walkley slashed his 2017 iPhone unit estimate from 223 million to 219 million, as he expects buyers to postpone iPhone purchases ahead of the new iPhone, which is due later this year.
On Friday, Apple Inc. (AAPL) shares closed up 0.28% at $152.96. Year to date, the stock is up more than 32%, while in the last year, it is up almost 61%.