Could Ap­ple go much higher, maybe even over $200?

Financial Mirror (Cyprus) - - FRONT PAGE -

Cor­po­rate earn­ings sea­son is upon us, and the largest com­pany by mar­ket cap is set to re­port in the com­ing week. The new Ap­ple Watch has al­ready de­buted. With all this com­mo­tion sur­round­ing Ap­ple Inc. (NAS­DAQ: AAPL) in the near fu­ture, an­a­lysts have weighed in on the tech gi­ant to shine some light on what to ex­pect.

Ar­gus re­it­er­ated its Buy rat­ing for Ap­ple raised its price tar­get to $145 from $135, im­ply­ing up­side of 15%, with­out in­clud­ing the div­i­dend. The firm has an­other more for­ward-look­ing price tar­get, via a two-state dis­counted free cash flow model, that gives a value for Ap­ple north of $200.

The of­fi­cial price tar­get mainly re­flects on­go­ing strength in iPhone, along with pos­i­tive signs of Mac de­mand for the cal­en­dar first quar­ter of 2015.

Ar­gus raised its fis­cal 2015 and 2016 sales and earn­ings per share (EPS) fore­casts for Ap­ple. De­spite year-to-date mar­ket out­per­for­mance af­ter an equally ro­bust 2014, Ap­ple shares re­main at­trac­tively val­ued, given that its op­er­at­ing fun­da­men­tals con­tinue to run ahead of share price ap­pre­ci­a­tion.

Ar­gus now ex­pects sales of 56.0 mln iPhone units, up from 53.0 mnn, and iPhone rev­enue of $38.2 bnn, up from $35.5 bnn. Ar­gus also nudged up ex­pec­ta­tions for Mac units in the sec­ond quar­ter of 2015.

Given a stronger ex­pected con­tri­bu­tion from the iPhone, Ar­gus raised its 2015 fis­cal year earn­ings fore­cast to $8.78 per share from a prior $8.55. The firm also raised its 2016 fis­cal year fore­cast to $9.44 per share from $9.10. With no sig­nif­i­cant ad­just­ments, events or charges in any pe­riod, the long-term EPS growth rate fore­cast for Ap­ple is 13%.

Ar­gus gave its opin­ion on the new Ap­ple Watch: “We are not count­ing on much of a con­tri­bu­tion from Ap­ple Watch in and of it­self; as tech­nol­ogy prod­ucts go, it is more wanted than needed. And in its first it­er­a­tion, Ap­ple Watch is likely more of a cost cen­ter than an earn­ings driver, mean­ing it could be a tiny hit to Ap­ple’s mas­sive earn­ings. How­ever, this new prod­uct keeps Ap­ple rel­e­vant and top-of­mind for con­sumers as the smart­phone space en­ters the slug­gish sum­mer months lead­ing up the new prod­uct launches in the fall.”

The firm also be­lieves that the Ap­ple Watch, though likely ir­rel­e­vant or even slightly neg­a­tive to the 2015 fis­cal year earn­ings, keeps Ap­ple rel­e­vant and on top of con­sumers’ minds as the smart­phone space en­ters the slug­gish sum­mer months lead­ing up the new prod­uct launches in the fall.

Among its strengths, Ap­ple Watch was called a nifty fit­ness tool, in that you can mon­i­tor your heart­beat, work­out per­for­mance and other met­rics with a glance at your wrist. The firm said that a weak­ness of the Ap­ple Watch is that we are not all buff 20-some­things in span­dex.

Shares of Ap­ple were down 0.6% to $126.01 Tues­day morn­ing. The stock has a con­sen­sus an­a­lyst price tar­get of $139.72 and a 52-week trad­ing range of $73.05 to $133.60.

Hav­ing a $145 tar­get ver­sus a $135 price tar­get is still more up­side than seen be­fore. The prob­lem is that it is still not that big for Ap­ple in­vestors. Now con­sider that $200 ob­jec­tive on the longer-term hori­zon. Ap­ple’s mar­ket cap is now about $735 bln, but a rise to $200 would give Ap­ple a mar­ket cap ap­proach­ing $1.2 bln.

Even if Ap­ple buys back and re­tires an­other $100 bln in stock, it would be a $1 trln value if Ar­gus is close to be­ing right here.

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