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iPhone 8 To Trigger Apple Inc. Stock Super Cycle

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Apple could make only an incremental iPhone hardware update this year, according to Wall Street expectations. This has led some to believe that the company will revamp its 2017 handset iPhone 8, taking its stock to greater heights.

iPhone 8 To Trigger Apple Inc. Stock Super Cycle

2017 iPhone 8 to be a big catalyst for Apple

Credit Suisse believes the iPhone 7 — expected to be launched in September — will see a “muted” upgrade cycle. Analyst Kulbinder Garcha believes the 2017 iPhone 8 will have a major redesign coinciding with the 10th anniversary of the product.

The 2017 iPhone 8 is rumored to feature a curved glass case housing a 5.8-inch AMOLED display. Rumors also suggest that Apple could embed many features into the display itself, such as a Touch ID sensor, speaker and FaceTime camera.

“We see a number of features and upgrades, including an OLED [organic light-emitting diode] screen, full glass display, no home button, enhanced Taptic Engine, improved camera, and wireless charging in the iPhone 8,” Garcha noted. “While this is some time away, we believe the iPhone 8 will be feature and specification rich.”

Even if such features come in just a Pro version of the device, they should help drive an accelerated replacement cycle and attract new users, “and should result in mix improvements,” the analyst believes. Based on this, Credit Suisse expects Apple to win over 39% of the general smartphone market with sales to reach 250 million units in 2018.

Trimmed EPS estimate for 2017

Garcha believes the major changes to the 2017 iPhone 8 will help Apple court new users and trigger an acceleration of upgrades for existing iPhone customers, causing Apple’s share in the smartphone market to increase. A modest upgrade for the iPhone 7 and significant innovations for the 2017 iPhone 8 not only break Apple’s usual pattern, but the naming is also expected to change. The 2017 iPhone 8 is expected to be named the iPhone 8 rather than the 7s.

On Apple shares, Garcha maintains his price target of $150 and Outperform rating, but he did cut his calendar year 2016 estimate to $7.80 and also revised his calendar year 2017 EPS estimate to $9.67 — down by 5%. Since Apple is expected to make a major redesign to the iPhone 8 in 2017, Garcha is eyeing EPS of $12.32 in 2018.

On Thursday, Apple shares closed up 0.42% at $97.55. Year to date, the stock is down by over 9%, while in the last year, it is down by over 23%. The stock has a 52-week high of $132.97 and a 52-week low of $89.47.

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