After another excellent year in the market, Apple Inc. (Nasdaq: AAPL) now has a market cap of $871 billion, and the $1 trillion mark may be just around the corner.
According to GBH Insights head of technology research Daniel Ives, a perfect storm of strong iPhone demand, rising iPhone prices and a potential earnings tailwind from tax reform will make Apple the first member of the trillion-dollar market cap club by the end of 2018.
[See: 7 of the Best Stocks to Buy for 2018.]
While it will remain difficult to gauge true Apple iPhone X demand until supply constraints are eliminated, Ives predicts Apple will sell 258 million iPhones in fiscal 2018, eclipsing its previous record of 231 million units in fiscal 2015. In addition, he also says the iPhone replacement rate will jump from 27 percent in 2017 to 38 percent in 2018 due to pent-up demand.
Apple has been expanding its base of iPhone users globally, but Ives says there are at least 350 million current iPhone users who have devices that are at least two years old.
“We believe a sizable portion of these users, in addition to users with newer devices and potential Android switchers, will look to upgrade with iPhone X due to the age of their device and the more significant changes/enhancements to the iPhone X device,” he says.
He estimates as many as 70 million iPhones will be due for upgrades in the next 12 months in China alone, one of Apple’s most important markets for international growth.
[See: 7 of the Best Tech Stocks to Buy for 2018.]
At the same time Apple is recording record iPhone unit sales, Ives says average iPhone sales price will increase from $643 in 2017 to a record $746 in 2018.
On top of the profit the company turns on the sale of each device, Ives says the newest family of iPhones will also bring in another wave of services revenue as well. GBH estimates Apple Services revenue could top $20 billion by fiscal 2020. “It all comes down to the success and elongated demand trajectory of iPhone X over the coming quarters to determine if Apple finally ends up joining the elusive trillion dollar market cap club in 2018,” Ives says.
GBH has a “highly attractive” rating and $205 price target for Apple stock.
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Apple Inc. (AAPL) Is Headed to a $1 Trillion Valuation originally appeared on usnews.com
