Why GBH raised its Apple target to $245

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Daniel Ives has eyeballed the Street’s 2019 iPhone estimates and decided they may be too low.

 

From “Good Things on the Horizon for Cook & Co.,” a note to clients that landed on my desk Thursday morning.

The Street continues to be laser focused on the demand trajectory for iPhones into 2019 with the trifecta of next generation iPhones on the horizon and the Street modeling iPhone shipments of roughly 220 million units, which could ultimately prove to be conservative in our opinion given the underlying demand drivers. We believe 350 million iPhones are in the “window of opportunity” to upgrade over the next 12 to 18 months with Apple needing to capture a majority of these units as part of this upgrade cycle to make a clearly successful iPhone product cycle in 2019 and lay the groundwork for future services/software growth and steady Phone demand over the coming years.

With positively trending ASPs heading into this 2019 product cycle, we believe many of the growth fears on the Street have been alleviated around Apple in the near-term, however this upcoming product cycle remains a linchpin for Cook & Co. to lay the groundwork for “steady” iPhone growth for the next few years.

With September Street numbers and FY19 set up well heading into a potentially robust iPhone product cycle along with a massive capital return strategy as another tailwind, we continue to believe Apple shares are compelling over the coming year despite the recent run. In particular we continue to believe the “high octane fuel” from the services business which is on a trajectory to be a $50 billion annual revenue stream by 2020 speaks to the stepped-up monetization of Apple’s unparalleled installed base that is front and center for Cupertino (and its investors) over the coming years.

Maintains Highly Attractive rating and raises price target to $245 from $215. (Apple touched $217 today before pulling back.)

My take: Ives is swimming hard to stay above water. Three weeks ago (July 31) he was at $200.