Apple is set to report earnings Tuesday May 2, and analysts at Credit Suisse are advising clients to buy Apple stock ahead of the release.
Shares of Apple have climbed 24% so far this year to $US143.69 as of 10:22 ET. In a report circulated to clients April 28, Credit Suisse analyst Kulbinder Garcha reiterated his “Outperform” rating and $US170 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.
“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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