Apple Stock: Analysts See Dollar Signs In iPhone X, Apple Watch 3, TV

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Bookmark this page and keep checking back for the latest Apple stock news. We’ll be providing continuing updates as news about the iPhone maker and its shares unfolds. You’ll find analysis, stock trends and more.

UPDATE 9/18/2017: Apple stock tumbled after the company’s big event last Tuesday and then languished below $160 for two days before rebounding on Friday. Now it’s a new week, and Apple stock was on the rise again early this morning. However, it ended the regular trading day in the red, down 0.76% at $158.67.

Apple stock perma-bulls see nothing but dollar signs in the iPhone X, Apple Watch Series 3 and Apple TV 4K, but others are saying, “Not so fast.” The $1,000 price tag and extreme supply constraints are giving others pause.

Strong demand expected for the iPhone X

Analyst reports on Apple stock following the iPhone X reveal have been largely positive as analysts see massive dollar signs thanks to that hefty price tag. Doesn’t sound like most of them expect big problems convincing consumers to pay that much for an iPhone.

For example, Macquarie analyst Benjamin Schachter said in a note to investors that he expects “strong demand,” not only for the iPhone X but also the Apple Watch Series 3, which has been liberated from the iPhone, and the Services revenue that will come along with all those new devices. Unfortunately, his colleagues in Asia expect supply of the iPhone X to remain constrained until at least the first quarter of next year, adding that this may even be “optimistic.”

Delayed demand won’t matter for Apple stock

Thus, Schachter sees supply constraints as the greatest challenge for the company, but he’s not worried about a one- or two-quarter supply delay because he expects demand for the handset to remain “robust.” He still expects a “super-cycle” out of the iPhone X and reiterated his Outperform rating and $180 price target on Apple stock.

BMO analyst Tim Long also has an Outperform rating and $180 price target on Apple stock, and he especially liked the higher prices on the iPhones. Not only was the iPhone X priced at $1,000, but Apple also raised the price of the iPhone 8 and 8 Plus relative to where prices on new handsets have stood in past years. He expects a “healthy” average selling price on the iPhone thanks to the higher prices, especially with upselling to higher amounts of storage.

Although he feels the iPhone 8 and 8 Plus are more like an “s” version because they don’t have many features differentiating them from last year’s iPhone 7 and 7 Plus, he still expects them to sell. He notes that iPhone 6 and 6s users will particularly enjoy the “impressive leap in day-to-day use.”

Like everyone else, Long was disappointed by the November release date for the iPhone X because it’s later than expected. He adds that this brings his estimates for the September quarter to the lower part of Apple’s sales guidance, but he doesn’t think it really matters. Thus, he says that delayed demand is just fine for Apple stock “because FY18 metrics look the same or better.”

Apple stock is heading for $200, say some…

Guggenheim analyst Rob Chira sees a steady path toward $200 for Apple stock riding on the company’s new products. In fact, he boosted his price target, tacking another $10 onto the $190 he previously had as his target for Apple stock.

He feels that the iPhone X cycle will be Apple’s longest iPhone cycle in three years driven by “pent-up demand,” despite the signs we’ve seen that demand for new iPhones isn’t pent-up. Apple’s last earnings report revealed that consumers weren’t really pausing their iPhone purchases ahead of last week’s event. All in all, we’ve seen some mixed signals from the company because early this year, management said consumers were pausing their purchases, while just before the event, the numbers made it look like they weren’t.

The other two factors Chira sees driving the extra-long cycle are “a multi-year OLED display rollout” and “double-digit increases” in the average selling price for the iPhone.

…But Apple stock needs high iPhone X sales to reach $200

Elazar Advisors warned in a post for Seeking Alpha that the delay in availability for the iPhone X could have a bigger impact on Apple stock than most of Wall Street would like to admit. They explained that they “want to like Apple stock” but noted that sales growth is needed for it to “accelerate meaningfully.”

They said that in order for Apple stock to reach $200 a share based on a P/E of 15 times, the company will need earnings of $13.50 per share for fiscal 2018. However, consensus stands at only $10.95 for the year, so the company will need “blowout revenue growth” between this December and next December. They looked back at the iPhone 6 cycle, as much of Wall Street has before the big iPhone event, but noted that this time around, quantity is a huge concern because supply for the iPhone X will be severely constrained.

Essentially, it all boils down to how many iPhone X units Apple can make because if it takes too long, consumers will probably give up. Thus, not only is the company testing how high it can raise iPhone prices, but it will also test how long it can make consumers wait for their phones. With all the comparisons between Apple and Tesla, investors will now have to decide whether they think consumers will wait for an iPhone X just as they did for a Model S, Model X or Model 3, relatively speaking, of course.

PREVIOUS UPDATE, 9/11/2017: Apple stock rallied on Monday, closing in the green after losing in the previous four trading sessions. The shares tumbled by about 3% after topping on Sept. 1 at $164.05, the most recent record high closing price. Wall Street will be listening and watching closely on Tuesday as Apple is expected to finally reveal the iPhone X, and analysts are anxious to hear exactly when the pricey smartphone will launch. But whatever the date ends up being, analysts are sure to be projecting huge unit numbers for the tenth anniversary model.

Apple Stock iPhone 8 / iPhone X Launch Event
Image Source: (screenshot)

iPhone X supply to be severely constrained: analyst

KGI Securities analyst Ming-Chi Kuo warned in a note on Monday that the iPhone X will be in “severe short supply.” He said that Apple’s suppliers can build just 10,000 units of the phone in one day, which, if true, indicates massive yield problems. As a result, it may be nearly impossible to find an iPhone X for quite some time, he said.

The question here is whether investors will really care that the iPhone X is in such short supply. Ultimately, what matters is how many Apple can sell, at what price, and when. Analysts will likely weigh these factors and try to gauge how cannibalization will play out among the iPhone X, iPhone 8 and iPhone 8 Plus. Most had already been expecting the ultra-premium model to cannibalize the less expensive models, which of course would be a good thing where Apple’s top line is concerned.

However, if Kuo is right—and he usually is when it comes to Apple—analysts will have to start considering the flip side. Will consumers be willing to hold out until the iPhone X becomes more widely available, or will they buy one of the less expensive models instead?

Will Apple stock rise or fall after Tuesday’s event?

Wall Street is now debating whether Apple stock will gain or fall during and after Tuesday’s event. Gene Munster of venture capital firm Loup Ventures predicts a 7% or 8% drop, he said on CNBC’s Halftime Report on Monday. He previously expected a 10% decline within the next one to three months.

Munster is looking further out than many on Wall Street because he predicts “some wringing of hands” in a few weeks when investors start looking at the March and June quarters. Of course, if consumers do hold out for an iPhone X, those quarters might not be too bad because their purchases could be significantly delayed due to the constrained supply. Munster added that if the rumors of LTE on the Apple Watch Series 3 turn out to be true, Apple stock will benefit. He estimates that the Apple Watch business will double if the device becomes “untethered to the phone.”

Looking for a trillion-dollar valuation from Apple stock

Despite the probably supply constraints on the iPhone X, Wall Street seems very excited and started pushing Apple stock higher right out of the gate on Monday. The shares have already gained by about 40% year to date, although they still have a ways to go before they will carry the iPhone maker to a trillion-dollar valuation. In order for that to happen, Apple stock must climb to $193.70, according to MarketWatch.

Nonetheless, CNN Money sees room for Apple stock to run because it’s trading at a discount to the broader market. The shares are trading at less than 15 times earnings estimates for 2018, while the S&P 500 is trading at about 17 times earnings for next year. After subtracting the $261 billion, the iPhone maker has on its balance sheet, its valuation falls to less than 10 times 2018 earnings estimates.

Apple stock may have another good thing going for it. Drexel Hamilton analyst Brian White expects the company’s capital distribution plans to help support its stock, so he doesn’t believe the Apple stock run will end with Tuesday’s iPhone event. He continues to see “attractive upside potential.”

Apple stock closed up 1.81% at $161.50 on Monday.

PREVIOUS UPDATE on Apple stock

Apple stock enjoyed a long stretch in which it set record after record every day, soaring higher and higher ahead of the expected iPhone 8 launch next week. At least one analyst has boosted his price target for Apple stock ahead of the big event, and Wall Street is now estimating and taking bets (of a sort) about how high the shares will go.

Despite that, Apple is in the red, at least as of this writing, possibly because one well-known watcher of the company is moving against the crowd and predicting a 10% decline after the iPhone 8 is revealed.

apple stock
MichaelGaida / Pixabay

Setting the stage for Apple stock after the iPhone 8

Piper Jaffray analyst Michael J. Olson released his iPhone 8 upgrade survey on Tuesday, and in that note, he set the stage for the company’s stock after the big reveal next Tuesday. He recalled commentary by Apple management that consumers were supposedly pausing their iPhone purchases because of the widespread rumors about the next model, even while reporting that his survey suggests most people don’t intend to upgrade this fall.

However, he feels that the uptake rate this year will be better than past iPhone cycles except for the iPhone 6 cycle, which was the first with a dramatically bigger and newer form factor. He added that in the 12 months after the iPhone 6 was launched, unit sales jumped 36% year over year. He’s projecting only a 12% increase in units, although of course this is off a much larger base than what the iPhone 6 was launched off.

Nomura Instinet raises target price for Apple stock

In a note on Wednesday, Nomura Instinet analyst Jeffrey Kvaal boosted his target price for Apple stock from $175 to $185 a share, implying that the shares will rise 14% from where they are now. He feels that the company is in a good position heading into Tuesday’s event.

Kvaal touted the expected “supercycle” triggered by the tenth anniversary iPhone, saying that Apple is going into “the long-awaited iPhone supercycle on its front foot.” He continues to expect the company to beat consensus estimates because of the growth in its iOS base and also the “pent-up demand” for a new iPhone form factor, although other analysts from other firms have said they don’t see any evidence that such pent-up demand exists.

The iOS installed base is over 60% bigger than it was going into the iPhone 6 cycle, Kvaal noted.

Why Apple stock could rise after the reveal

The bull camp continues to churn out notes about why Apple stock could rise after Tuesday’s event. In addition to the tenth anniversary iPhone 8, the company is also expected to reveal a less premium iPhone 7s and 7s Plus and the Apple Watch Series 3 and next-generation Apple TV.

In his report on Tuesday, Bernstein analyst Toni Sacconaghi listed three reasons the shares might keep rising after the product reveals next week. First, he believes that the consensus estimates for the iPhone 8 could still be too low on both average selling prices and units. He pointed out that in the past, Apple stock has outperformed during iPhone cycles that beat expectations.

Second, he said that Apple stock is trading “comfortably below its peak relative multiple during its last iPhone super-cycle,” which presumably is the iPhone 6. He added that based on his estimates for fiscal 2018 and using a similar multiple, the stock would trade at $186, although he feels that even that could be too low. His target price is set at $175 currently.

And finally, the Bernstein analyst sees “material” potential contributions from currencies and other products like the rumored LTE Apple Watch model and the HomePod.

Apple stock to $177 on iPhone 8 reveal?

It seems the options market is also pricing in an upward trend for Apple stock after the reveal on Tuesday. According to a post on Investopedia, options traders are betting on a nearly 7% increase in the stock. The post adds that “an overwhelming amount of options traders” are betting that Apple shares will rise to around $177 by Oct. 20. If the shares do indeed rise that much, it would tack on almost $60 billion to the company’s market capitalization.

According to Michael Kramer, open interest in options contracts favors the calls 13 to one, with the market strongly implying that the stock will soar past $170. He found 40,000 call contracts at the $170 strike price and 30,000 contracts at the $175 strike price. The contracts were priced at about $1.60 apiece, and the $175 calls imply that options traders expect Apple stock to reach $177 by Oct. 20.

However, he added that implied volatility is high for the options at almost 22%, so options traders are clearly expecting some extreme volatility in the name, given that October options for the S&P 500 have an implied volatility of only 9%.

Gene Munster predicts 10% decline in Apple stock

While options traders are betting on an increase after the iPhone 8, Gene Munster, who previously covered Apple stock as an analyst, predicts that the shares will fall by about 10% within the next three months. Munster left his position as analyst and went to venture capital firm Loup Ventures, where he is now a managing partner, but Wall Street still listens carefully when he talks about Apple.

He spoke about the iPhone maker on Tuesday on CNBC’s Power Lunch, and he looked at what the company’s stock has done over the last four years between the iPhone announcement and three months after it. He explained that usually, the largest gains going into a product cycle suggest a decline after the announcement. Thus, he expects exactly that after the iPhone 8 is revealed.

Rumors about the iPhone 8 have been running rampant for at least the last year, and Apple stock is up by about 50% in that time frame. Munster said it’s only natural for some investors to take some profits after the big day they’ve been looking forward to finally arrives.

Apple stock was little changed Wednesday afternoon, although it dipped on Tuesday and earlier on Wednesday, falling below the recent high of $164.94.

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