iPhone 12 Strength not Slowing Down, Despite Blip Apple (AAPL) Could Hit $3 Trillion in Market Cap by Year-End - Wedbush

Recent supply checks show that iPhone 12 strength is not showing signs of slowing down anytime soon, providing investors with renewed optimism that the recent correction in Apple's (NASDAQ: AAPL) stock is just a “short term blip,” writes Daniel Ives from Wedbush.

Apple stock hit an all-time high above the $145 mark just a few days before its earnings report covering the December quarter, before pulling back to $130s. Apple shares closed the last week over 4% in the red.

“Apple's stock has taken a breather since its jaw dropping performance in the December quarter came and passed for the Street in late January. That said, we view this as a short term blip in the stock's upward trajectory as our Asia supply chain checks continue to show robust strength in this iPhone 12 supercycle into the rest of 2021,” Ives wrote in a note sent to clients.

On the back of this fundamental strength, Ives expects the Cupertino-based tech giant to reach a valuation of $3 trillion by the year-end.

“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. We also believe there is an upward shift of ASPs for iPhones in this cycle as the iPhone Pro continues to be the predominant model sold globally, which bodes well for top-line numbers heading into the March and June quarters.”

As in the past, it seems that China is leading the way with Ives forecasting that about 20% of iPhone upgrades will be coming from this region over the coming year.

“In a nutshell, while services growth remains the key to the Apple re-rating story over the past nine months, the hearts and lungs of the Apple growth story are built around iPhone installed base upgrades. With 5G now in the cards and roughly 40% of its "golden jewel" iPhone installed base not upgrading their phones in the last 3.5 years, Cook & Co. have the stage set for a supercycle 5G product release to play out in 2021,” he adds.

Commenting on recent news concerning Apple Car, Ives says that it’s a matter of “when not if” Apple enters the EV race.

“While the timing of an EV partnership remains a key focus of the Street and EV industry over the coming months we assign a 85%+ chance that Apple will announce an EV partnership/collaboration over the next 3 to 6 months. With US auto stalwarts GM and Ford announcing very aggressive EV endeavors over the past month and a Biden-driven green tidal wave on the horizon, we believe now is the right time for Apple to dive into the deep end of the pool on the EV front,” he concludes.

Ives rates AAPL as “Outperform” with a $175.00 per share price target set on the stock.

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $127.62 yesterday.

You May Also Be Interested In

• Tesla plans 'flying' Roadster stunt at SpaceX Texas site as early as August
• UBS Reiterates Buy Rating on NVIDIA (NVDA), Expects Q2 Revenue Beat
• Pro Diversity Network (IPDN) Reports Q2 Loss of $0.15