Apple Inc (NASDAQ:AAPL) has maintained its ‘Outperform’ rating, with its 12-month price target raised to $190 from $180 by Wedbush Securities analysts after iPhone sales recovered in early 2023 after a tough December.
“Our Asia iPhone supply chain checks this week have been incrementally more positive with a modest uptick in demand coming out of China for Apple with a clear demand rebound happening in this key region post December despite the uncertain macro backdrop,” the analysts wrote in a note to clients.
“The months of January and February and early indications around March are steady on the iPhone front for Cupertino globally which is a stark contrast to what we saw in the supply-constrained December quarter due to zero Covid China issues," they added.
Apple’s shares were 0.4% higher at $152.25 in Wednesday's pre-market trade.
READ: Apple gets upgraded price target from Wedbush analysts even in the face of fiscal Q1 expectations misses
Describing Apple as “a steady Cupertino ship in rough macro waters,” the analyst said they were seeing no major unit cuts from suppliers in Asia around iPhone production yet - a good sign that shows a steady demand curve on the flagship iPhone 14 Pro in March/June and goes against the common negative investor sentiment on Apple and other tech stocks in a rising interest-rate environment.
They also noted that Apple is gaining market share in the China region with US/Europe demand holding up well as they estimate that roughly 25% of the current iPhone installed base has not upgraded their iPhone in more than four years.
“With the highly anticipated anniversary edition iPhone 15 set to be launched in the September timeframe the baton handoff from iPhone 14 to iPhone 15 looks to be a steadier transition than some other peak-to-valley iPhone cycles of the past,” they said. “We also believe ASPs (authorized service providers) are bumping up towards a roughly $900 ASP on iPhones which is a noteworthy trend heading into the next iPhone cycle.”
With another 100 million plus new iPhone users on the Apple ecosystem added over the past 15 months and improving attach rates on services, coupled with price increases, the analysts said they believed that Apple's services business should reaccelerate over the coming quarters back to a double digits trajectory.
Some of the levers that potentially abound for Apple include the Apple Gass-AR/VR (augmented reality/virtual reality) headset launch by the summer timeframe, a hardware subscription plan, more service bundling options, and some new hardware launches on the Mac product line in 2023.
“The golden installed base of Apple is creating more stability in this uncertain macro and remains key to our bullish thesis,” the analysts said.
Contact the author at stephen.gunnion@proactiveinvestors.com