Analyst: Don’t Worry, Apple Has Room to Grow

Apple_privacyOne conversation with Apple (NASDAQ:AAPL) Chief Financial Officer Peter Oppenheimer gave Credit Suisse analysts Kulbinder Garcha enough confidence to reiterate an Outperform rating and a $600 price target fon the company’s stock. Oppenheimer sounded “confident, yet realistic,” and gave the analyst reason to believe that “there are several longer term growth drivers that exist for Apple.”

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The research note circulated by Garcha to investors was one of a quartet of notes written on Friday morning in support of Apple, and these bullish assessments pushed the iPhone maker’s stock up slightly in morning trading, although it had given up most of its three-dollar gain by early afternoon. Garcha’s price target of $600 represents an increase of close to 40 percent on the stock chart for Apple’s shares from their closing price of $430.58 on Thursday. In comparison, the stock has declined 36.72 percent in the six-month period ending on that date.

Garcha pulled out two particular growth drivers from his conversation with Oppenheimer: China, and the continued expansion of the high-end smartphone market…

While there are only 11 Apple stores located in China, the country generated $23 billion in sales last year. And China is not the only country where Apple is expecting growth; the company is also opening stores in 15 new countries this year and it plans to expand operations in Brazil and Russia.

But more significant for the company’s future profitability is the iPhone saturation rate. Based on data from research firm IDC, Credit Suisse has found that more than 45 percent of all smartphones are sold above the 400-dollar price point. Growth may be stronger at the low-end of the market, but the fact that the average price of the devices is increasing means that the high end of the smartphone market will experience growth as well.

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“Management noted Apple’s ecosystem and lower churn will help drive iPhone platform growth,” Garcha wrote. “This fits with our own thesis initially discussed in Smartphones – High-end going higher that the high-end of the smartphone market is growing to unprecedented levels.”

Analyst Abhey Lamba with Mizuho Securities reiterated a Buy rating and a $575 price target for Apple based on expectations for the release of the next-generation iPhone in June or July, while Raymond James’s Tavis McCourt reiterated an Outperform rating and a $600 price target.

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