Is Apple Inc. (NASDAQ:AAPL) looking overvalued right now? The $1 trillion mark is drawing increasingly closer as Apple trades at record highs of over $163. The stock is building momentum ahead of the launch of the much-hyped iPhone 8 model. The Wall Street Journal has now reported that the date of the launch has been scheduled for September 12. According to people familiar with the matter, Apple will launch a product-announcement event on this date. The event will feature the iPhone 8 as well as two updated versions of the current iPhone 7.
Fresh design leaks suggest that we are looking at the biggest iPhone redesign in almost a decade. We can expect some major changes including the removal of the main home screen button, a taller rounder OLED screen, a new software bar and wireless charging. Apple could use wireless charging pads that create an electromagnetic field where the current flows between the surface and the phone placed on it.
Also look out for: a huge price hike ($900-$1,200 plus tax), and a cutout at the top of the screen for the earpiece, facial recognition sensor, and selfie camera. However it now seems unlikelt that the screen will be curved (a la Samsung) but will instead stay flat like former iPhone models.
“The color reproduction of the OLED screen means that when the display shows black, it blends in nearly perfectly with the phone’s notch and thin black edges on the front, presenting a seamless look, according to the people familiar with the product” reports Bloomberg.
Research firm IDC has also helped build excitement with its release of a bullish estimates for the new phones. IDC says it expects iPhone shipments to reach 9.1% in 2018 following the release of iPhone 8, 7S and 7S Plus models. According to the research firm, this will be the biggest iPhone shipment growth for the last 2 years. Similarly, Canaccord Genuity’s Michael Walkley says “Our surveys indicate strong consumer interest in and anticipation for new iPhones anticipated to launch in September.” He has a buy rating and bullish $180 price target on the stock.
Interestingly however the stock only has a Moderate Buy analyst consensus rating on TipRanks. In the last three months, this breaks down into 25 buy ratings and 9 hold ratings. Meanwhile the average analyst price target of $170.42 stands at a fairly limited upside of 4.6% from the current share price of 4.33%. Increasingly, bullish expectations for the iPhone 8 ‘supercycle’ are being factored into the current share price- which means that any disappointment could cause prices to crash and burn.
Let’s now take a closer look at 6 top analyst predictions, which I set out from bullish to bearish below. TipRanks shows that all these analysts have a high success rate and average return, but as we can see here they show a mixed outlook on how Apple will perform in the next 12 months:
1 Drexel Hamilton, Brian White- buy rating, $208 price target (27% upside potential)
White says that the ‘solid’ Samsung Note8, launched on August 23 ‘with fire and fury’, will do little to diminish the iPhone 8 success. He concludes “we continue to believe consumers are eagerly awaiting the 5.8-inch iPhone 8 this fall and we believe Apple’s stock has healthy upside potential as reflected in our $208 price target.”
2 Guggenheim, Rob Cihra- buy rating, $190 price target (16% upside potential)
The analyst projects iPhones will be the most meaningful driver for Apple from now through fiscal 2020, driving well past 70% of growth (a jump from 62% to 66% of revenue mix). Cihra says “we expect iPhone growth to accelerate near-term, driven by pent-up demand + multi-year OLED rollout + meaningfully higher ASPs [average selling prices].”
3 UBS, Steve Milunovich- buy rating, $180 price target (10% upside potential)
According to Milunovich, there is no need to be nervous about the iPhone 8 price tag. He uses the $950 price tag for the Samsung Note8 as guidance because Apple tend to price their flagship iPhones at a slight discount to the Note. This leads Milunovich to assume a price tag of around $900 for the base OLED iPhone 8- undercutting the speculated $1,200 price tag considerably.
4 RBC Capital, Amit Darayanani- buy rating, $176 price target (7.7% upside potential)
The iPhone 8 launch will be a “fairly material one for Apple,” Amit Daryanani recently told CNBC. He expects that iPhone 8 sales, growth in the services business and share buybacks should help Apple reach the $1 trillion market cap in roughly the next half year if price-to-earnings multiples remain the same.
5 KeyBanc, Andy Hargreaves- hold rating, $150 price target (-8.17% downside potential)
Hargreaves warns that the new OLED phone could be sold without a fingerprint sensor. He says supply checks indicate that Apple was unable to find a workable solution for the in-display optical fingerprint. “Without this critical feature, we see a negative impact to the next iPhone cycle… in regards to Apple, we believe this will ultimately lead to disappointment for more-bullish investors.” Nonetheless he believes that initial demand for the phone will be strong while supply constraints will create ‘positive news flows’.
6 Barclays, Mark Moscowitz- hold rating, $146 price target (-10.6% downside potential)
Moscowitz has previously warned that “pre-launch fervor” for the iPhone 8 “could get frothy”. He is “somewhat skeptical” the next iPhone launch could rival the iPhone 6 mega-growth cycle.