Apple Inc. (NASDAQ: AAPL) hit the ever-elusive $2 trillion market cap this week, setting records and sending analysts back to the drawing board to see how much higher the stock could run from here. One analyst in particular sees significant upside for this iPhone giant.
Wedbush reiterated an Outperform rating and with a $515 price target, implying an upside of 11% from the most recent closing price of $462.83. The boutique brokerage firm, however, sees a bull case of $600 for Apple.
The firm still believes the stock has a lot of gasoline left in the tank with an iPhone 12 “supercycle” on the near-term horizon. While the soft macro and COVID-19 backdrop are weighing on near-term consumer demand trends, Apple has a “once in a decade” opportunity over the next 12 to 18 months, as Wedbush estimates roughly 350 million of Cupertino’s 950 million iPhones worldwide are in the window of an upgrade opportunity.
Wedbush also noted that China remains a key ingredient in Apple’s recipe for success as it estimates roughly 20% of iPhone upgrades will be coming from this region over the coming year. To this point the firm is seeing considerable strength from the China region over the past few months, a dynamic it expects to continue heading into the next six to nine months.
Taking a step back, Wedbush believes the iPhone 12 represents the most significant product cycle for Apple since the iPhone 6 in 2014 and will be another defining chapter in the Apple growth story looking ahead despite a softer consumer spending environment. The firm still believes many on the Street are underestimating the massive pent-up demand around this supercycle for Apple, which remains the opportunity for the bulls heading into 2021 as this monetization engine heads into its next gear.
For a sum-of-the-parts valuation, the brokerage firm assigns a $700 billion to $750 billion valuation range for the Services business, considering the increasingly importance of this key revenue stream. Going into 2021, Wedbush sees the Services business as a more than $60 billion annual revenue stream. Specifically, the firm said:
While services remains a linchpin to the bull thesis, the growth on wearables has been eye popping as we are now modeling AirPods unit sales of 90 million this year vs. 65 million in 2019 with a new version slated to be released ahead of holiday season representing another demand catalyst.
Apple stock traded up about 2% to $483.25 Friday morning, in a 52-week range of $201.00 to $483.39. The consensus price target is $425.17.