Apple Analysts See 'Once In A Decade' Opportunity Ahead Of iPhone 'Supercycle'

Even as Apple Inc.'s AAPL shares are hovering around all-time highs, Wall Street analysts see the scope for further upside.

The Apple Analysts: Wedbush analyst Daniel Ives maintained an Outperform rating for Apple shares with a $515 price target. 

Morgan Stanley analyst Katy Huberty maintained an Overweight rating and increased the price target from $431 to $520.

Wedbush Says Apple Has Gas Left In The Tank: With Apple shares hitting a $2-trillion market cap last week, the stock has "a lot of gasoline left in the tank" ahead of an impending iPhone 12 "supercycle," Ives said in a Friday. 

Even as soft macroeconomic conditions and the COVID-19 pandemic weigh on consumer demand, the tech giant is in for a "once in a decade" opportunity, as 350 million of its 950 million iPhones worldwide are in the window of an upgrade opportunity, the analyst said. 

Ives continues to see considerable strength from China for Apple over the next six to nine months.

The Services business and the 5G iPhone models are key to growth going forward, the analyst said.

With reports over the weekend suggesting that U.S. companies, including Apple, will be allowed to retain TENCENT HOLDING's/ADR TCEHY WeChat app in China, investor fears over the ban are being allayed, Ives said in a separate note issued Monday. 

A WeChat ban is unlikely to affect or disrupt Apple's ecosystem within the key China market, the analyst said, adding that the WeChat ban will be limited to the U.S. app.

See also: Apple Shares Breach $400 After Tech Giant Announces Record Quarter, Stock Split

Morgan Stanley On 5 Apple Investor Questions: Given that Apple is now less reliant on the iPhone than before, Huberty said the company should be valued like a technology or consumer platform.

Valuing Apple using cash flow — the company does not report non-GAAP EPS — the shares trade at a 25.5 times multiple, a 2% discount to tech platforms and a 10% discount to consumer platforms, the analyst said.

The stock is inexpensive versus peers, implying that it has further room to run, she said. 

The App Store cannot be considered in isolation, Huberty said, referring to the risk of App Store take rates being cut or Cupertino providing more flexibility in terms of iOS software and device integration. 

Several industries have been created because of the App Store, the analyst said. 

The loss of "Fortnite" is immaterial to Apple's revenue base, she said. 

On the WeChat ban, Huberty said she doesn't believe Apple will be prohibited from providing access to Chinese citizens in China, and that if Apple faces any restrictions in China, it will likely lobby to request an exception or exemption.

On rumors of Apple offering bundling services, Morgan Stanley said these will serve to accelerate Apple's new subscriber growth and reaccelerate Services revenue growth in fiscal year 2021.

Between fiscal years 2021 and 2026, Apple has the potential to grow revenue at over 8% annually and EPS at over 11% annually, using conservative assumptions and assuming minimal impact from any new products or services, Huberty said.

AAPL Price Action: At last check, Apple shares were trading slightly positive at $497.60. 

Related Link: Why This Apple Analyst Says Fiscal 2021 Will Be 'Big Year' For iPhones

Photo courtesy of Apple.