Citi Expects Apple's Stock To Ripen In 2018

2017 was a good year for Apple Inc. AAPL investors given a near 50 percent return and the stock trading close to its all-time highs. Many among Wall Street are expecting 2018 to be just as rewarding to investors.

The Analyst

Citi's Jim Suva maintains a Buy rating on Apple's stock with an unchanged $200 price target.

The Thesis

Heading into 2018 Suva offered five reasons to justify his bullish stance on Apple's stock.

• 1. The iPhone "super upgrade cycle" will improve as the company fixes production issues which resulted in longer lead times versus prior cycles.
• 2. A reduction in the U.S. corporate tax rate would result in a 7 percent boost to Apple's earnings per share. A cash repatriation tax break/holiday to support share buybacks could add another 7 percent to its EPS.
• 3. Higher screen repair costs and higher chargers for AppleCare could represent a catalyst in addition to growth in App Store revenue and Services.
• 4. Apple's enterprise business represents another area of growth in the mid-term and the company's Applewood business is a longer-term positive.
• 5. Apple's stock is still trading at a 20 percent discount versus the S&P 500 index and is merely in-line with its five-year median despite showing improving fundamentals.

Price Action

Shares of Apple were trading higher by 1.3 percent at $172.97.

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