Apple (AAPL) PT Raised to $140 at BofA/Merrill Lynch; iPhone 8 Will be 'Super-Long' Cycle
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BofA/Merrill Lynch raised its price target on Apple (NASDAQ: AAPL) to $140.00 (from $125.00) while maintaining a Buy rating. The firm said iPhone 8 is likely to be a super-long cycle instead of boom-bust.
Analyst Wamsi Mohan commented, "We raise our revenue and ASP assumptions on the iPhone 8 but take a more normalized multi-year view on the iPhone 8 cycle (unlike the iPhone 6 cycle of 37% growth followed by 8% unit decline). Given our expectation that Apple will introduce three models (7S, 7S+, 8) this fall (see our Asia iPhone Supply Chain note), we expect demand for 8 (OLED) will outstrip supply for a longer term based on OLED panel supply as well as strong upgrade demand from the installed base."
While cutting near term estimates they view shares of Apple as attractive given: (1) near term weakness well understood, (2) potential for significantly tax advantaged cash repatriation, (3) longer iPhone 8 cycle driving close to two years of ~10% growth, (4) higher ASP on the iPhone 8 (also higher BOM), (5) continued gross profit dollar growth, (6) strong iPhone upgrade potential from the installed base and (7) optionality from increased onshore cash for capital return and M&A.
The firm lower iPhone units for the Mar and June quarters from 55mn/47mn to 50mn/44mn. Meanwhile they model 220mn (+4% Y/Y), 240mn (+9% Y/Y) and 266mn (+11% Y/Y) iPhone units for F17, F18 and F19, respectively, vs. prior 230mn, 254mn and 266mn.
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