Will Apple Inc. (AAPL) iPhone X Translate to Overall Upside Risk or Reward? Analysts Weigh In

Mizuho expects limited upside potential; Guggenheim lifts price target on AAPL, predicting key upside ahead.

Apple Inc. (NASDAQ:AAPL) has Wall Street divided between analysts who are less swayed by the tech titan’s fancy new gadgetry, concerned rising ASPs will translate to danger to upside- and voices who are trumpeting the bullish horn, making a case that consensus is underestimating prospective upside.

Mizuho analyst Abhey Lamba weighs in rooted in apprehension, noting that the 10th anniversary edition model of the original iPhone appears to line up with the rumor mill buzz. However, “We find delayed release of the product and high price points to be incrementally negative for the company as it will likely limit any near-term upside to estimates,” warns Lamba, who also sees that no feature in the iPhone X is so appealing as to bump up demand.

In fact, the analyst fears the exact opposite, highlighting “a risk of demand push-out (wherever physically possible) to next year when Apple will likely release OLED versions more broadly.” Considering that by this time next year, the titan could already be slated to offer upgraded display technology and design, with OLED screens “more broadly available,” Lamba predicts, “mainstream iPhone users might consider pushing out their purchases to next year when they can get greater innovation at a lower price.”

Sure, the just under $1,000 price tag could cultivate a “reasonable response in markets that offer subsidies,” notes the analyst. However, when looking at markets that demand the full price paid upfront, Lamba believes adoption will be “limited,” adding that ” supply shortages initially will likely offer limited potential for upside.”

Even if Apple’s iPhone play benefits the ASP, the analyst points to danger of “dilutive impact on margins as increase in component costs will likely be greater than the rise in ASPs,” reiterating a Neutral rating on shares of AAPL with a $150 price target, which implies a close to 7% downside from current levels. (To watch Lamba’s track record, click here)

As the Street angles for iPhone unit growth of 14% and ASP growth of 6% for fiscal 2018, the analyst in turn watched out for “limited upside” to these forecasts, contending: “Further, with the stock trading at around 15x FY18 consensus EPS estimates (11x FCF), we think valuation fully reflects robust expectations.”

In the opposite corner, there is Guggenheim analyst Rob Cihra, who advises investors not to “sell the news as iPhone ASP should keep up-siding.” Though some shareholders look at Apple shares that have surged 39% year-to-date, far outclassing the S&P 500’s performance of 11%, the analyst says “we disagree” with the concept of taking the sale now, projecting that climbing iPhone ASPs will “further accelerate revenue growth.”

Calling for the titan’s “biggest iPhone cycle in 3 years,” the analyst maintains a Buy rating on AAPL stock while boosting the price target from $190 to $200, which represents an almost 25% increase from where the stock is currently trading. (To watch Cihra’s track record, click here)

Commending the iPhone Xs as “evolutionary refreshes of the iPhone 8/Plus” thanks to its edge-to-edge OLED display coupled with 3D sensing for facial recognition, the analyst believes the titan is set up to pave “[…] more runway for appreciation driven by our expectation for: 1) pent-up demand + 2) a MULTI-year OLED rollout + 3) double-digit increases in iPhone’s blended ASP.”

Is Wall Street playing it safe on the titan? How does Cihra defend against Lamba’s case of Apple’s short-term risk of narrow upside? Ultimately, this analyst contends that the titan remains a vastly underestimated one: “A big jump in blended ASP, which we now forecast +17%Y/Y in FY18E up from our prior +14%Y/Y, a dynamic we still do not believe is fully captured in consensus. We believe worries about a higher price tag crimping demand are contrary to history, as Apple’s high-end demographic has rather consistently proved it is willing to pay MORE for new iPhones. Indeed, Apple’s only iPhone to genuinely flop over the last decade was its low-end, de-spec’ed plastic 5c, which launched in Sep-13 and was discontinued within 2 years.”

Where does the word of the Street side on this tech titan? For now, it appears that the bulls win here, as TipRanks analytics demonstrate AAPL as a Buy. Out of 31 analysts polled by TipRanks in the last 3 months, 23 are bullish on Apple stock while 8 remain sidelined. With a return potential of 8%, the stock’s consensus target price stands at $173.11.

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