Game Of Phones: Apple Bulls Predict The 2018 iPhone Average Selling Price

Bernstein said in a note Monday its positive thesis on Apple Inc. AAPL is predicated on two beliefs, namely that the iPhone X super-cycle will prompt iPhone unit growth in 2018 and that Apple will enjoy strong ASP growth.

As such, Bernstein has an Outperform rating and a $175 price target on the shares of the company.

Analyst Toni Sacconaghi models iPhone ASP of $773 in fiscal-year 2018, or $786, including the positive benefit from currency, with the estimate derived using product mix numbers from the firm's survey of 1,100 iPhone users. The analyst said the mix of iPhone X is by far the biggest driver of ASP improvement.

ASPs are also impacted by expected richer storage configurations, price increases on iPhone 8 and 8+ and currency, the analyst added.

See also: Why It's Too Soon To Judge Apple's Next Product Cycle

Bernstein raised its iPhone ASP estimate for 2018 from $702 to $753, with the consensus estimate at $717. The firm also raised its 2018 revenue estimate from $264 billion to $276.8 billion and the earnings per share estimate from $11.05 to $11.75.

"We note that every $10 increase in ASP boosts our FY 18 revenue and EPS estimates by $2.5B and $0.14 respectively," the firm said.

While noting that Apple stock has been mixed following iPhone announcements, the firm said it sees the risk-reward as attractive for three reasons, namely:

• 1. Consensus expectations for fiscal-year 2018 appear to be too conservative. Apple stock has outperformed in the past whenever iPhone cycles exceed investor expectations.
  2. Apple shares trade well below its peak relative multiple from its last iPhone super-cycle. At that multiple, Apple should be trading at $197.
  3. Potential contribution from currency and other products such as HomePod and Watch 3 may be material.

Meanwhile, former Apple analyst Gene Munster told Benzinga he expects the ASPs for iPhones to be significantly higher next year than investors expect.