Multiple positives ahead of the iPhone 8 launch make Apple stock a solid long play.
Shares of Cupertino, California-based Apple (NASDAQ:AAPL) have been in a solid uptrend for the last one year. AAPL stock has gained 68% in the last one year, outperforming the broader market indices by a significant margin. For comparison, Nasdaq Composite (INDEX:COMPX) gained 28% in the last one year, while the broader S&P 500 (INDEX:SPAL) is up by 15.6% in the same timeframe. The year-to-date performance has been commendable, with Apple stock making several new highs through the year. With Apple stock price flirting with its all-time highs, is it a good buy going into the much-awaited and widely-covered iPhone 8 release?
iPhone 8 Mock-Up Surfaces Online
The talk around the upcoming iPhone 8 is only getting louder and louder as we head closer to the potential launch date. The latest product of the rumor mills has seen bgr.com release images of an iPhone 8 mock-up which it believes is pretty close to the final product design. And, the initial reactions to the design have been much more than just 'positive.' Adding to the design overhaul, the iPhone 8 news mill is also reporting many other positives.
No Delay in iPhone 8 Launch
One particular concern among followers of AAPL stock has been the potential delay in iPhone 8 launch, which was apparently constrained by the significant hardware upgrades. With several analysts issuing commentary supporting this thesis, the concerns of Apple stock bulls isn't misplaced. A delay in the launch will negatively impact Apple's holiday quarter revenue/earnings as customers could delay their purchases in anticipation of the iPhone 8 model.
However, these concerns have been put to rest, at least temporarily. In a recent research note to investors, Morgan Stanley highlighted that the firm's Greater China Technology Research analysts were yet to see delays in the iPhone 8 supply chain. Analyst Katy Huberty hiked her Apple price target to $177, from the earlier $161 target. The latest price target implies a potential upside of 16% from the last closing price. The analyst models a bullish case price target of $203, citing FY 18 iPhone 8 expectations being 'far too low.' All in all, the positive report should go a long way in soothing spooked Apple investors.
The High Customer Loyalty
The high brand loyalty among iPhone users is no secret and this will once again be a major tailwind for Apple in the next 12 months. The loyalty of the iPhone users contributes a significant part to the stickiness of Apple's most important product. The stickiness of the product is something which attracted Warren Buffett, one of the greatest investors of all time, to invest in the Cupertino tech major. And, this isn't changing anytime soon. According to a recent Alphawise survey, 92% of surveyed iPhone customers who likely to upgrade in the next 12 months plan to buy an iPhone. In comparison, Samsung came a distant second with 77% of Samsung owners opting to stick on with the South Korean brand. LG at 59%, Motorola at 56% and Nokia at 42% were the other noteworthy brands surveyed. Clearly, the upcoming iPhone models should enjoy tailwinds as a significant chunk of the iPhone installed base do upgrade their devices in the next 12 months, which should provide a big boost to FY18 numbers.
Mac Segment Poised For Growth.
In addition to the encouraging signs around Apple's largest revenue segment, the Cupertino-based tech giant is also rumored to be prepping to launch updated laptops, which will most likely see the light of the day at its upcoming annual developer conference, known as WWDC. The WWDC 2017 is scheduled to be held from June 5-June 9, less than a month away. As reported by Bloomberg, the MacBook Pro is expected to get a new Kaby Lake processor from chipzilla Intel (NASDAQ:INTC), while the 12-inch MacBook and the 13-inch MacBook Air will also get new faster processors. The rumored updates should help sustain the momentum in the Mac segment, which returned to YoY growth in Q1 F17 (December 16 ending quarter).
To sum up, Apple Inc. is likely on track to launch the iPhone 8 on a regular launch schedule, which is a welcome news for Apple investors. With the early mock-up design being well-received and a majority of iPhone users planning to stick on with the Apple brand, the writing is clearly on the wall. Morgan Stanley's Katy Huberty summarized it well saying the current iPhone Fy 18 estimates are 'far too low.' Apple is poised for the iPhone 8 supercycle, which could lift Apple stock above $200 per share, as outlined in the bullish case scenario from the Morgan Stanley analysts. In the near term, the MacBook refresh in June should keep help Cupertino sustain growth over the next couple of quarters. In conclusion, AAPL stock remains a solid long play as we head into the iPhone 8 launch.
Apple stock is among our Top Stock Picks from the technology sector, which have outperformed the NASDAQ by over 135%. Do not forget to check them out if you are looking to invest in great tech names. If you are also interested in buying auto sector stock, do check out our top auto stock picks, which have beaten the S&P 500 by an impressive 185%.