CREDIT SUISSE: Buy Apple ahead of the iPhone 8 'Super Cycle'
Shares of Apple have climbed 24% so far this year to $143.69 as of 10:22 ET. In a report circulated to clients April 28, Credit Suisse analyst Kulbinder Garcha reiterated his "Outperform" rating and $170 price target on the stock, implying more than 18% of potential upside.
"That recent data points from the supply chain suggest that overall iPhone shipments remain in line to ahead of expectations, with potential for a stronger mix," he said.
The analyst said that the real reason to buy Apple stock is the pent-up demand for a new iPhone with substantial changes. Garcha said the iPhone 8 is that iPhone, and that a "super cycle" of iPhone upgrading will ensue.
Here's Garcha:
"Over the course of the next year, we continue to believe that an iPhone 8 Super Cycle (starting with 3 models, one of which will be OLED) should drive up replacement rates and drive new customers. This should result in iPhone volumes growing to ~265mn by 2019 from ~215mn in 2016."
Garcha referred to a March 10 report from Credit Suisse to explain why he believes the iPhone 8 will be a meaningful upgrade. That report said:
"The iPhone 8 is expected to have many new features. These new features include OLED, an iris scanner, laser auto-focus, a USB Type C connector, SLP (Substrate Like PCB), an L-shaped battery, glass casing, and a wireless charger-far more new elements than previous models. In our view these updates are far more compelling than those from other smartphone vendors, which we believe will drive a iPhone super cycle with faster upgrade, more net adds, as well as a better mix."
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