Analyst Dan Ives predicts a 38% upside in Apple stock, citing 250 million iPhone users who haven't upgraded in over 4 years as potential buyers.
Ives believes iPhone 15 pricing and carrier promotions will boost sales by 8-10 million units, with a focus on higher-margin Pro models.
Beyond iPhones, Ives sees Apple's services segment returning to double-digit growth, valuing it at $1.5 trillion and contributing to an overall bullish outlook.
As reported by the Apple Maven recently, Apple stock took a hit following the launch of the new iPhone 15. The “sticky point” for investors and traders seems to be pricing: the Cupertino company chose not to mark up its new smartphones, except for the Pro Max.
Despite the recent events, one analyst chose to bump up his target price on AAPL. Wedbush’s Dan Ives now sees Apple stock climbing to $240, a Street-high, which represents an upside opportunity of 38% from current levels.
Below, we talk about how the sell-side shop envisions this rally taking shape over the next several months.
Apple: Still An iPhone Story
At the core of Dan Ives’ outperform rating is his understanding that the iPhone 15 cycle will surprise analysts and investors to the upside.
The analyst has been talking for a while about a substantial proportion of the current iPhone installed base that will need to upgrade its devices soon – “[approximately] 250 million+ of 1.2 billion iPhone users worldwide have not upgraded their phones in over 4 years”, to be precise.
The icing on the cake was the launch of the iPhone 15, which Dan Ives called “an impressive event”. He believes that the lack of a price increase across all models except the Pro Max will help to sell an additional 8 to 10 million units worldwide, aided in part by carrier promotions.
In addition, Wedbush believes that the mix of Pro models sold in fiscal 2024 will be heavier than the historical average to the tune of about 15 percentage points. If confirmed, this should be a positive to revenues, ASP (average selling price), and likely margins.
… But It’s Not All About The iPhone
Lastly, Dan Ives’ price target bump was also grounded on Apple’s services. He sees the segment returning to double-digit growth in a matter of quarters. The analyst values this corner of the business alone, which accounts for only about 20% of total sales, at about $1.5 trillion.
Wedbush’s ultra-bullish case for 38% returns ahead is a combination of the services piece described above and the product portfolio that the analyst values at about $2 trillion.
The Apple Maven’s Take
I’ve always found the business of forecasting iPhone cycles a bit speculative. While it is true that Apple has made mistakes in the past (think iPhone 5c), the company has become better over time at anticipating demand and meeting it – that is, when the supply chain is not an issue.
If Dan Ives is correct in his assessment of the upgrade cycle, the opportunity to upgrade 250 million devices at an assumed ASP of $900 suggests $225 billion in potential iPhone sales in fiscal 2024 from upgraders alone. For reference, Apple’s iPhone revenues in fiscal 2022 reached “only” $205 billion.
On the service side, I see Wedbush’s projection of double-digit growth and a $1.5 trillion valuation as fair and reasonable. In fact, I have explained why I believe that services alone could be worth $2 trillion, using a simple set of assumptions.
For the reasons above, I think that Dan Ives’ price target of $240 for Apple shares is sensical. Nailing the timing of the potential 38% gain, however, is a bit trickier. The direction of economic growth, inflation, and interest rates can pose risks in the short-to-medium terms.