Apple Wins A New Bull A Week Before Earnings

Loop Capital Markets' Ananda Baruah initiated coverage of Apple Inc. AAPL with a Buy rating and $172 price target and sees three catalysts that can help the stock move higher.

The more than 30 percent gain since the start of 2017 has resulted in Apple's stock trading at 16x P/E, which is the high-end of its 10–16x range, Baruah noted. But this isn't necessarily a concern as the analyst's $172 price target is derived on a 14x multiple on his 2019 EPS estimate of $12.24.

Catalyst 1: Upside To The Street's Estimate

Apple should be able to beat the Street's estimates moving forward due to a more favorable sales mix of the iPhone 8, the analyst argued. Part of the upside to estimates could be due to some of the new and "meaningful" technology in the soon-to-be released phone, including VSCEL technology (vertical-cavity surface-emitting lasers for augmented reality features).

In fact, Apple is currently asking members of its supply chain to "ship as much componentry as they can" as it believes it will be grated with a "stronger echo or super-cycle" next year.

Catalyst 2: iPhone Volume

If the iPhone 8 is fully pushed out into 2018 then it will set up Apple to benefit from "increasingly accelerative" revenue growth, the analyst added. Specifically, revenue growth could surge from a mid-single digit growth rate in the first half of 2017 to more than 20 percent in the first half of 2018.

Catalyst 3. Don't Forget The Dividend

Finally, investors holding on to Apple's stock gives investors exposure to "capture some near-term appreciation" along with a 1.7 percent dividend yield. But at the same investors are also positioned to benefit any incremental boost from the "echo or super-cycle" throughout 2018.

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