Analysts at Wedbush have raised their target price for Apple Inc (NASDAQ:AAPL) to $220 per share from $200, repeating an 'Outperform' rating for the tech giant.
In a note to clients, the Wedbush analysts said: "Our Asia supply chain checks on Apple over the last few weeks remain very firm (further slight improvement) as Cupertino is in the final stages of setting up for its iPhone 14 release in mid-September with invites likely coming in the coming weeks."
They added: "We believe the initial order for 90 million iPhone 14 units out of the gates has stayed firm and will be roughly flat with iPhone 13 despite the macro storm clouds. This speaks to the underlying demand story that Apple anticipates for this next iPhone release with our estimates that 240 million of 1 billion iPhone users worldwide have not upgraded their phones in over 3.5 years."
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"In particular we believe Apple is expecting another heavy iPhone Pro and Pro Max mix shift which is a clear positive for ASPs heading into FY23. While the base iPhone will stay at the same price we believe a $100 price increase on the iPhone 14 Pro/Pro Max is likely in store given component price increases as well as added functionality on this new release," they said.
The analysts noted that: "From a spec perspective, iPhone 14 will have enhanced camera technology (48-megapixel), while we believe the iPhone 14 Pro models will also have the innovative A16 chip as more consumers head down the Pro path. There will also possibly be some storage enhancements on both the base iPhone 14/Pro."
"Battling through the China shutdown with September launch ready. Apple is in a strong position from a supply perspective for iPhone 14 heading into this highly anticipated September launch. Despite the zero Covid shutdowns in China that disrupted the Asia supply chain across the board in March-May and caused some white knuckles on the Street, Cook yet again navigated Cupertino through the storm and now is set for another flagship iPhone 14 upgrade cycle to take place over the next 6 to 9 months.
"While the softer macro will clearly play a role in the demand story, we believe the baseline for 220 million iPhone units in FY23 is likely a low bar given the pent up demand story that we are seeing globally for Apple. In the key China region we estimate that roughly 30% of iPhone consumers are in the window for an upgrade cycle with many likely Pro/Pro Max buyers, which continues to push ASPs higher along with the $100 price increase likely," the Wedbush analysts added.
"Services looks strong into FY2023. With Apple's services business set to be roughly $90 billion in FY23 and set to eclipse the $100 billion threshold in FY24 with this double digit growth pace showing healthy demand ahead, we believe this key revenue stream remains at the epicenter of Apple's multiple and growth story during this market storm. On a growth and EBITDA basis, we believe Apple's services business is worth alone north of $1 trillion which coupled with the flagship hardware business makes the risk/reward very compelling at current levels. In a nutshell, we believe Apple's growth story remains well intact with clear momentum around iPhone 14 around the corner despite the shaky macro," they concluded.
The Wedbush analysts said Apple remains their favorite tech name with its recent checks giving them further confidence in the iPhone cycle into 2023.
Contact the author at jon.hopkins@proactiveinvestors.com