Apple Inc. stock is up 18% in the year-to-date. Bullish investor sentiment and a potential iPhone supercycle could lift AAPL stock even higher.
Cupertino, California-based Apple (NASDAQ:AAPL) has recently been in the news, mostly for the right reasons. Barring the chatter regarding its appeal against the European Union's $14B tax charge, Apple is enjoying a lot of positive buzz with respect to its next iPhone launch. The result has been positive commentary from multiple wall street analysts and a rising stock price. Apple stock price is up over 18% in the year-to-date, outperforming the Nasdaq Composite (INDEX:COMPX) as well as S&P 500 (INDEX:SPAL) in the same time frame. Apple stock has rallied 51% since the May 2016 lows, closing the last trading session at a price of $136.7 per share. The AAPL rally has, so far, been fuelled in a large part by a stronger-than-expected performance of the iPhone segment in the holiday quarter and the rapidly growing Apple services segment. However, we think the stock could be headed further higher driven by a growing bullishness among investors and potential for an iPhone 8-driven super-cycle.
The iPhone Supercycle Will Revive Growth In China.
The talk of Apple's "iPhone Supercycle" driven by a certain iPhone X has picked up in the last few days, with a number of Wall Street analysts upgrading AAPL stock citing the coming iPhone supercycle. As reported by Barron's Tiernan Ray, Andy Hargreaves from Pacific crest expects the iPhone X "should accelerate unit sales growth in F2018." What exactly does "accelerate" mean in quantitative terms? Well, another Wall Street analyst provides an answer to this. In a note titled, "China key to supercycle," Morgan Stanley's Katy Huberty re-iterates her 'overweight' rating on Apple stock while hiking the price target to $154, from a prior $150. As per Katy, "Apple is positioned to take net users from local Chinese smartphone brands," as “one in five local Chinese branded smartphone users will switch to iPhone upon their next purchase." Now, given the size of the Chinese smartphone market, taking a 20% share from the local players could add up to significant revenue dollars for Apple, and more importantly, the company could return to growth in the "Greater China" region. The weak performance in the region had been a cause of major concern for Apple investors in 2016.
The Morgan Stanley (MS) investor note also had other positives for Apple investors. The firm sees Apple selling 260M units in FY 2018 (September 2018 ending), up from the earlier estimate of 253M units and ahead of the current street consensus for 241M units. Moreover, the MS analyst also sees the iPhone ASP (Average selling price) climbing to $713, up from the earlier $695 estimate. These estimates support an FY2018 EPS of $11 on revenue of $266.7B. That's ahead of the current AAPL street consensus, which expects Apple to report an EPS of $10.13 on revenue of $244.7B.
Investors are increasingly bullish on Apple stock.
Apple investors have become increasingly bullish over the last couple of months. While around 65% of investors were bullish on Apple stock at the end of December, 81% of investors now think Apple is headed higher. The result has been a constant rise in Apple stock price, as the stock price has climbed from $117 on December 27 to the current price of $136.7 (Feb 21 close price).
Given the rising bullishness among Apple investors, the rally in AAPL stock could be far from over.
Apple stock price is up by nearly 18% in the year-to-date. The stock could be headed further higher, driven by the upcoming iPhone supercycle and rising bullishness among Apple investors and analysts, alike. We think Apple stock is a good buy even at a $700B market cap, which is why it has consistently made it to our list of top stock picks, which have beaten the NASDAQ by over 135%.