3 Factors That Won Apple's Stock A New Bull

Apple Inc. AAPL stock is already up more than 35 percent year-to-date, but HSBC analyst Steven Pelayo says it’s not too late for buyers to jump into the stock. In fact, HSBC has initiated coverage of Apple with a Buy rating, and Pelayo sees at least three catalysts for the stock to trend higher in coming months.

Loyal Customers

According to Palayo, the first reason to be buying Apple stock is the iPhone X. HSBC predicts there is a massive group of loyal Apple customers that have been waiting patiently for the iPhone X.

Beating Estimates

Second, Pelayo said Apple is well-positioned to top consensus 2018 earnings estimates via a combination of favorable iPhone mix, higher average sales prices and stronger margins. HSBC is calling for a combination of 13 percent iPhone unit sales growth in 2018 and a 12 percent increase in blended ASPs.

Apple Services

Finally, USBC is predicting Apple Services revenue to grow at a 15 to 20 percent compound annual rate through at least 2020.

Watch For Volatility

The only potential drawback to buying Apple stock now is the potential for near-term volatility, Pelayo said.

“In the near term, we admit there are some risks from a push-out in demand as consumers wait for iPhone X and supply constraints further govern the manufacturing ramp in the December quarter,” he wrote.

Even after its impressive 2017 run, Apple stock remains a value, Pelayo said.

In addition to its new Buy rating, HSBC has a $193 price target for Apple based on a 15x 2018 estimated earnings multiple.

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