Historical Precedent Makes The Case For Another 10% Upside In Apple Shares

Shares of Apple Inc. AAPL were trading lower by 2 percent Wednesday amid an overall market selloff. BMO Capital Markets' Tim Long isn't worried and now sees upside in the stock to $170 per share.

Long maintained an Outperform rating on Apple's stock with a price target boosted from $150 to $170. This is a reasonable target, which implies the stock will merely trade in-line with the market (versus a 10 percent discount) at 16x his calendar year 2018 earnings per share estimate of $10.66. In fact, the analyst acknowledged that his model may even be conservative.

Flashback To The iPhone 6

Long said Apple's stock is trading at a similar multiple today than it was ahead of the 2014 iPhone launch. But by the time the iPhone 6 was launched in mid-2014, Apple's stock multiple completely closed the gap and the analyst sees a similar outcome occurring this year.

Long also argued that Apple's iPhone 6 shipments were 50 million units higher than the iPhone 5s in the first year of availability. The analyst noted that even if the iPhone 8 cycle proves to be just half as good as the iPhone 6 in terms of incremental units, then Apple's 2018 earnings per share could gain another $0.50 based on that fact alone.

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