Why This Analyst Sees 25% More Upside in Apple

Apple Inc. (NASDAQ: AAPL) pulled back with the rest of the market on Tuesday. Many analysts have said that the market was running hot through August and now may be the time for it to cool off. Despite Tuesday’s pullback, one analyst sees Apple running much higher from here.

Wedbush reiterated an Outperform rating with a $150 price target, implying an upside of 24% from the most recent closing price of $120.96.

The boutique brokerage firm noted that across the board it is seeing an uptick around production and pent up demand for the slate of iPhone 12 models (expecting four new models) set to be launched in the early to mid-October time frame.

While the launch and 5G smartphones hitting the shelves will be in October, Wedbush continues to believe the official virtual unveiling of this linchpin product launch will be in late September with an announcement from Apple in the next few weeks.

Wedbush detailed in the report:

We continue to believe the line in the sand a few months ago was between 65 million to 70 million 5G iPhone 12 units and now has moved into the 75 million+ range with 80 million a stretch goal. Importantly, with our estimation that 350 million of 950 million iPhones worldwide are currently in the window of an upgrade opportunity, we believe this will translate into an unprecedented upgrade cycle for Cook & Co.

On the services business, Wedbush assigns a $900 billion to $950 billion valuation range, given the increasing importance of this key revenue stream, which is getting new appreciation by investors.

The firm notes that the stock could be volatile over the coming weeks and months, given its parabolic run since March lows and overall tech bubble fears now in the market. Wedbush believes the combination of Wall Street numbers moving higher and a further re-rating in shares of Apple give the firm a high conviction in its bull thesis.

In a nutshell, Wedbush believes the iPhone 12 cycle and Rock of Gibraltar services segment will be a paradigm changer for Apple. The base case price target is $150, with the bull case even higher at $175

Apple stock traded down about 4% to $116.14 on Tuesday, in a 52-week range of $52.93 to $137.98. The consensus price target is $114.82.

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