Stock Analysis & Ideas

Apple Stock: Strong Buy on High Demand

The Street was a bit surprised with Apple’s (AAPL) announcement that there will be no price hikes for the newly released iPhone 14 (at least in the US). That’s not the only surprising thing about Apple right now, according to Wedbush’s Daniel Ives; the analyst thinks early demand trends are a tad surprising, and are coming in better-than-anticipated.

“We already are seeing delivery times push to mid-October for many Pro models and most pre-orders are now looking at 3-4 week deliveries and quickly pushing out,” the 5-star analyst said. “So far demand and orders for iPhone 14 are tracking slightly ahead of iPhone 13 and are tracking ahead of our expectations out of the gates.”

Even better, as far as ASPs (average selling price) are concerned, Ives’ checks indicate a “very heavy Pro/Pro Max mix that could be in the 80%-90% range.”

Ives thinks that of the global 1 billion iPhone users, around 240 million haven’t upgraded handsets in more than 3.5 years. This suggests there should be strong demand for the latest version, whose distinguishing features include the next-gen A16 Apple silicon chip (iPhone 14 Pro) and a 48-megapixel main camera – something Apple fans will “loudly applaud.”

The mix favoring Pro/Pro Max is especially promising and one Ives expects will continue. Estimating that around 30% of Chinese users are due an upgrade, Ives thinks many of them will head to the Pro/Pro Max section.

At the pace of current sales, Ives mulls over the prospect “many” Apple stores will have Pro shortages by late September/early October. The analyst sees Apple as well-equipped to navigate the difficult macro conditions, and based on the initial demand, thinks the “baseline for ~220 million iPhone units in FY23 is likely a low bar.”

So, good news for Apple but how does this translate to investors? Ives maintains an Outperform (i.e., Buy) rating while his $220 price target suggests the shares are currently undervalued to the tune of 43%. (To watch Ives’ track record, click here)

Most on the Street agree. Of the 28 analyst reviews posted during the past 3 months, 23 are to Buy. The average price target stands at $183.56, providing room for 12-month gains of ~19%. (See Apple stock forecast on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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