Analysts Pump Mindshare, $1 Trillion Valuation For Apple Inc. Stock

Analysts Pump Mindshare, $1 Trillion Valuation For Apple Inc. Stock
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It looks like Apple Inc. (NASDAQ:AAPL) has a near-stranglehold on teens as far as smartphone mindshare, according to a new survey, which suggests that Apple mindshare among U.S. teens will keep rising. Meanwhile, another firm claims that its latest survey offers new indications of pent-up demand for the iPhone this year, despite the disappointing smartphone upgrade figures from AT&T this morning. Most Apple stock bulls insist it doesn’t matter that the iPhone 8 and 8 Plus don’t seem to be selling all that well because of the ace up the company’s sleeve: the iPhone X.

Teens are the next generation of consumers, so any company that wants to keep its success rolling must capture mindshare among them. That’s certainly not a problem for Apple mindshare, however, according to Piper Jaffray’s Fall 2017 “Taking Stock with Teens” survey. The firm maintained its Overweight rating and $196 price target on Apple stock in the note that included the results of the survey and explained why the stock is pressured right now.

Piper Jaffray surveyed more than 6,000 U.S. teens, and analyst Michael Olson reports that 78% of them have an iPhone, putting iPhone ownership among teens at the highest level ever. In the spring, the firm found that 76% of teens had one, and Olson expects this metric to rise dramatically as 82% of teens expect their next phone to be an iPhone. He added that this is also the highest level, as 81% of teens said in the spring that they expect an iPhone to be their next phone. By comparison, only 13% of teens intend to get an Android as their next phone, and that’s flat with the reading in the spring.

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The firm’s strong readings on Apple mindshare among teens weren’t limited to just smartphones. Olson reports that the Apple Watch was still the top smartwatch among high school students. Although 83% of them don’t own a smartwatch, a slight decline in ownership from 81% in the spring, 12% do own an Apple Watch, an increase from 11% in the spring. In second place was the Samsung Gear, with 2% ownership among teens, which is flat from six months ago.

Olson also offered up another promising metric on Apple mindshare. He reports that purchase intent among teens grew dramatically as 17% of respondents plan to buy an Apple Watch within the next six months, versus 13% in the spring survey.

The Piper Jaffray analyst said the results of his firm’s survey on Apple mindshare make him even more optimistic on Apple stock. He noted that investors are concerned about the apparent lack of interest in the iPhone 8 and extreme supply constraints on the iPhone X, and this is weighing on Apple stock. However, he feels that both problems are only temporary and that neither will send consumers away from the iPhone.

Meanwhile, Morgan Stanley analyst Katy Huberty raised her price target on Apple stock from $194 to $199 on Wednesday and reiterated her Overweight rating following her firm’s survey. She feels that there’s significant pent-up demand for the iPhone, a bullish argument we’ve been hearing for at least a year. According to her, about 63% of iPhones currently in use are at least two years old as consumers have been waiting for a good enough reason to upgrade.

Morgan Stanley’s survey also relates to the topic of Apple mindshare, and it found an increase in loyalty to the brand. According to Huberty, 94% of iPhone users plan to stay with the Apple brand, up from 92% previously. Further, 14% of non-iPhone users plan to switch, versus 12% previously. Supposedly, 20% of those planning to buy a new iPhone intend to buy an iPhone X, while 23% want an iPhone 8 and 16% intend to buy the iPhone 8 Plus.

Bulls like Huberty and Olson continue to bang the iPhone drum for Apple stock, while others, like RBC analyst Amit Daryanani, are pushing the $1 trillion valuation thesis. He feels that the Trump administration’s policy changes could be a major stepping stone to helping Apple stock push the company toward a $1 trillion valuation. Between corporate tax cuts, a lower repatriation tax and other policy changes, he expects the company to have loads of cash lying around so that it can repurchase shares.

Daryanani has been pushing the $1 trillion valuation thesis for Apple stock for quite some time, and he feels that Apple stock is at an “attractive entry point” for those expecting a return to sales and earnings growth in fiscal 2017.

Apple stock ticked higher by as much as 0.2% to $156.87 during regular trading hours on Thursday.

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