ZINGER KEY POINTS
About 25% of the current iPhone-installed device base hasn’t upgraded their iPhones in over four years, according to Wedbush.
The firm estimates that the Services business is worth $1.2 trillion to $1.3 trillion for Apple's SOTP valuation.
Apple, Inc has remained fairly resilient amid thesupply-chain shocks, production disruptions, and a slowdown in demand.One analyst at Wedbush is even upbeat about the tech giant’s first-quarter performance and has upped his price target for the stock.
The Apple Analyst: Daniel Ives maintained an "Outperform" rating and increased the price target from $190 to $205, suggesting roughly a 25% upside from its current level.
The Apple Thesis: iPhone production has remained stable, with no major cuts to output amid strong global consumer demand and despite macro storm clouds, Ives said in a note, citing Wedbush’s iPhone 14 Asia checks.
The analyst said Apple clearly benefited this quarter compared to its December shortfalls, which had slipped into January and February. China's iPhone demand, in particular, has seen a clear uptick in the first quarter, he said.
January and February were ahead of expectations and the March checks now show a relatively strong finish for iPhones globally, he noted.
Despite U.S.-China tensions, Apple is gaining market share in China, Ives said. He noted that roughly 25% of the current iPhone-installed device base hasn’t upgraded their iPhones in over four years.
Ives expects the handoff from the iPhone 14 to the iPhone 15 anniversary edition to be a “steadier transition,” rather than some other peak-to-valley iPhone cycles of the past. The bump in average selling price to $900-$925 is also noteworthy, he said.
Ives also sees Apple's services business accelerate in the fiscal year 2024, with more than 100 million new iPhone users added over the past 15 months, improving attach rates on services, and price increases.
“We believe overall the Services business is worth $1.2 trillion to $1.3 trillion for Apple's sum-of-the-parts valuation and remains an underappreciated asset by the Street,” Ives said.
The analyst highlighted some of the many levers he sees for Apple, including the company’s annual Worldwide Developer Conference in June. The company could also unveil the AR/VR headset in June, implement a hardware subscription plan, include the new AI functionality in its ecosystem this fall and announce new hardware products on the Mac product line in 2023, he added.
“The golden installed base of Apple is creating more stability in this uncertain macro and remains a linchpin to our bullish thesis in a shaky macro,” Ives said.
Apple Price Action: Apple closed Friday’s session 1.56% higher at $164.90, according to Benzinga Pro data.