Apple Inc. (AAPL): More Upside Ahead


Analysts from Guggenheim and UBS are staunchly bullish on shares of tech giant Apple Inc. (NASDAQ:AAPL), both lifting price targets in their research reports. Between the tenth decade anniversary edition of the iPhone model exciting many tech enthusiasts and Apple’s dabbling into the field of Augmented Reality, the analysts see even more reasons now to expect upside for Apple shares.

Guggenheim analyst Rob Cihra has upped estimates for the next two years as he anticipates share-bolstering factors ahead with the iPhone X hitting this fall. As such, the analyst reiterates a Buy rating on shares of AAPL while lifting the price target from $150 to $180, which represents a 31% increase from where the stock is currently trading.

Cihra opines, “Key drivers are our expectation for both iPhone unit growth and ASP increases to reaccelerate over the next 2 years (compounding leverage), but also the limited supply of new OLED displays to extend the cycle’s timeline over 2-3 years. Adding OLED to just a new higher-priced flagship iPhone X this year then buys Apple another 1-2 years of follow-on cycling as it migrates OLED into lower end models. And 3D sensing technology opens up a whole new potential vector of differentiation and hardware+software innovation.”

For the fiscal year of 2017, the analyst lifts his revenue projection from $226 billion to $229 billion, marking a 6% year-over-year rise, and EPS from $8.71 to $8.87, marking a 7% year-over-year rise. For the fiscal year of 2018, the analyst boosts his revenue forecast from $245 billion to $264 billion, marking 15% year-over-year growth, and EPS from $9.82 to $10.70, marking 21% year-over-year growth.

As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, four-star analyst Rob Cihra is ranked #771 out of 4,501 analysts. Cihra has a 60% success rate and realizes 10.2% in his annual returns. When recommending AAPL, Cihra yields 38.5% in average profits on the stock.

UBS analyst Steven Milunovich likewise recognizes upside for the tech giant, particularly highlighting Apple as it targets Augmented Reality, which relies on computing to “digitally enhance the real world.” On back of a better upgrade and retention rates, the analyst reiterates a Buy rating on AAPL while boosting the price target from $138 to $151, which represents a 10% increase from where the shares last closed.

Milunovich notes, “Apple appears more interested in AR, which connects people, than VR, which potentially isolates experiences. Our work suggests that AR could be the next major innovation from Apple and that its competencies could make the company a winner. Industry sources are upbeat and anxious to see what Apple does. Investors could be surprised at how AR could reinvigorate the iPhone/iPad and possibly result in new products.”

Fundamentally, the analyst underscores four key assets weighing in the giant’s corner. First, the analyst points to “hardware expertise and superior hardware/software integration.” Second, the analyst commends Apple’s “consistent updated releases with most customers on the latest version of iOS compared with the fragmented Android OS base.” Third, the analyst appreciates the giant’s “[…] installed base of iPhone and iPad customers that can use AR rather than starting from scratch.” Lastly, Apple has “a cloud infrastructure that facilitates data gathering. We layout an introduction timeline and expect the next iPhone could include moderate 3D mapping using stereoscopic vision and possibly an AR software development kit,” Milunovich surmises.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Steven Milunovich is ranked #1,157 out of 4,504 analysts. Milunovich has a 53% success rate and earns 3.9% in his yearly returns. When recommending AAPL, Milunovich gains 12.3% in average profits on the stock.

TipRanks analytics indicate AAPL as a Strong Buy. Out of 35 analysts polled by TipRanks in the last 3 months, 28 are bullish on Apple stock and 7 remain sidelined. With a return potential of 4%, the stock’s consensus target price stands at $142.76.

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