Loop Capital Models For 13% Upside In Apple, Speculates On 'Nirvana' iPhone Lineup

Apple Inc. AAPL will be the first company to reach $1 trillion market capitalization if Loop Capital Markets' forecast is correct. 

The Analyst

Analyst Ananda Baruah maintained a Buy rating on Apple and raised the price target from $195 to $210.

The Thesis

Apple's stock is positioned net positive for the second half of calendar 2018, courtesy of the ongoing Services segment momentum and the launch of a lower-priced, LCD-based iPhone X, Baruah said in a Friday note. (See the analyst's track record here.) 

This will provide a tailwind to both revenue and iPhone X units, the analyst said. 

Baruah expects the iPhone mix to drive underlying dynamics in the second half. Even with the anticipated 10-15-million reduction in iPhone X version two units — a figure calculated based on reports suggesting a 20-percent reduction in the iPhone components sought by Apple — Baruah said Apple could still be on target, as the potential shortfall could be made up for by the iPhone 7.

Apple's calendar 2019 "Nirvana" iPhone portfolio could include an Phone X; iPhone 7 and 8s; and a new iPhone SE2 with an average selling price of less than $500, according to Loop. 

The firm expects version two of the iPhone X to come in three models:

• A 6.5-inch OLED model with ASP over $1,000.
• A 5.8-inch OLED model with ASP between $800 and $999.
• A LCD 6.1-inch model with ASP of about $750.

The momentum in Apple's Services segment is structural, with broad-based strength in the App Store, Apple Pay, Apple Music, iCloud and across geographies, Baruah said. 

Subscription growth remains strong and was up 100 million year-over-year in the June quarter to 270 million, according to Loop. 

The $100-billion buyback Apple commenced in the June quarter has the potential to add about $1.60 per share to earnings, rendering a normalized EPS of $15 compared to the $14.60 the Street estimates for calendar 2020, Baruah said. 

The Price Target

Apple shares have gained 10.4 percent year-to-date.

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Photo courtesy of Apple.