For those that follow the stock market, Apple’s share price dropped from record highs over the last month, falling from $194 to circa $185 levels amidst trade war jitters and some news of lower iPhone production levels. Tim Cook says he doesn’t worry about short-term stock price moves, but investors certainly do. Citigroup today released a report that expects AAPL to crest the $200 mark in 2019.
Apple’s stock performance in the last 30 days lags behind the S&P, although it’s still up almost 10% this year. The whole tech sector has taken a hit recently, with some accentuated fears that the China/US tariff war will impact Apple’s hardware prices.
Nevertheless, the Citigroup analyst shakes off current pessimism. They reference Apple’s continued Services expansion as a source of ongoing growth, and note that Apple’s holiday lineup of iPhones appears strong.
While iPhone X demand expectations have been tempered, we believe 2H18 lineup could spur demand given the differentiation in the higher end OLED models versus the LCD models and consumers becoming accustomed to paying a premium price for smartphones which are essential to daily life. We are not expecting a Super Cycle but we do believe sustainable single-digit unit growth of iPhone is achievable.
Apple has made it a business goal to double services revenue between 2016 and 2020, and it is well on track. Apple Music subscribers continue to rise, Apple is investing into TV original content that will result in some kind of new subscription service, and the company is planning a premium magazine and news subscription offering for next year as well. On top of all this, Apple continues to rake in billions from App Store commissions.
The Citi report estimates the number of Apple users with active paid subscriptions is nearing 270 million.
The analysts point to Apple’s upcoming 2018 iPhone to deliver sustainable single-digit growth, noting that customers appear receptive to paying premium prices for smartphones, which bodes well for Apple’s iPhone X and iPhone X Plus. We have already seen some supply chain murmurings that indicate the X Plus will be popular (likely priced around $1000). Citi also points to India for further iPhone sales growth over the coming years.
For people keeping score on the imaginary milestones chart, Apple stock’s last high was $194.20. The stock price has to cross the ~$204 level for Apple to become the first public company with a trillion-dollar market cap.
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