Analyst: Why The iPhone X Lived Up To Lofty Expectations

Heading into Apple Inc. AAPL's product launch event Tuesday, expectations for a high-end iPhone were elevated. The iPhone X, once announced, most certainly lived up to the "lofty expectations," at least according to Piper Jaffray's Michael Olson who maintains an Overweight rating on Apple's stock with an unchanged $190 price target.

Apple's new iPhone X's most notable features include a change to the form factor (edge-to-edge OLED screen) and 3D sensing capabilities with the only setback being the launch date of Nov. 3, Olson commented in a research report. As a whole, the iPhone X captured investor attention and could create a new cycle in which upgrade rates are superior to prior iPhone launches with the exception being the iPhone 6 where unit sales grew 36 percent year over year.

As a whole, the new iPhone cycle could result in a 12-percent growth rate in iPhone unit sales as there are approximately 330 million iPhone users on a device that is at least 2 years old, Olson added. It would be reasonable to assume that a "sizable portion" of these users will be upgrading their phones to the point where approximately 240 million new iPhone units will be sold in the 12 months following the iPhone X launch.

Finally, while Apple will benefit in the immediate term from strong growth, the rate of growth will slow down heading into fiscal 2019 and 2020, the analyst concluded. But even if assuming Apple's operating margins remain flat from fiscal 2018 through fiscal 2020 the company can still grow its earnings per share by 2 percent in fiscal 2019 to $10.90 and 5 percent in the following year to $11.40 per share.

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Image Credit: Apple