Citi raises its Apple price target to $265

By Steven M. Peters Updated Jan 11, 4:45PM EST · Published Oct 8, 12:00PM EDT

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From a note to clients by Jim Suva snagged by CNBC:

Apple shares will rally because the company will benefit from falling component costs for its phones, according to Citi Research.

“We increase our financial model primarily due to higher ASPs [average selling price] & stronger gross margins given the consumer preference for higher memory configurations of iPhones coupled with the new falling memory prices,” analyst Jim Suva said in a note to clients Monday. “We believe Apple shares are now setup as an attractive value investment with right-sized expectations.”

The analyst said memory represents 10 percent to 15 percent of the component costs in base iPhone models. But when a consumer buys a higher memory configuration that costs $100 more, it costs Apple only an incremental $20, he said. He noted flash memory prices are down 18 percent since March.

“Our checks suggest solid demand for iPhone XS & XS MAX and importantly most consumers opting for higher memory iPhone configurations,” the analyst said.

Suva raised his Apple fiscal 2019 earnings per share estimate to $14.43 from $13.92 versus the $13.61 Wall Street consensus.

Maintains Buy rating, raises price target to $265 from $230.

My take: Waiting to see the note. Meanwhile, can’t help noticing that Apple had already overshot Citi’s previous price target.

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