Analyst Raises Apple Price Target, Cites ‘Rejuvenated Momentum’
Evercore Partners analyst Rob Cihra has revised his Apple (NASDAQ:AAPL) price target upwards to $700 and reiterated his “Overweight” rating based on “rejuvenated momentum” from the company’s recently refreshed iPhone and iPad product lines, reports Apple Insider. Apple released the iPhone 5C and iPhone 5S in September, followed by the iPad Air and iPad mini with Retina display in November.
According to Cihra, the new products have not only given Apple renewed momentum, they will also help the company stabilize its future gross margins. The analyst also cited Apple’s sticky ecosystem and its ability to charge premium prices for its products.
“[W]e consider mobile thin-client computing one of the most important trends in tech but also routes to reaching consumers, where Apple’s high-end demo and multiple points of unique leverage keep it king of monetization,” wrote Cihra in a note obtained by Street Insider. “Like iTunes, Apple mostly looks to monetize by driving more hardware but we also see its App Store and iOS ecosystem as increasingly leverageable sources of engagement, measures of user behavior and cross-device tools for advertising and payments in both on/offline transactions,” noted the Evercore analyst.
Cihra also noted that Google’s (NASDAQ:GOOG) Android has failed to match the level of Apple’s app revenue generation, despite Android’s clear lead in “sheer app downloads.” According to Street Insider, Cihra forecasted that Apple would earn $4 billion in app revenue during calendar year 2014 — a 27 percent year-over-year increase. He noted that this would be approximately a 30 percent cut of the overall $14 billion in iOS app revenue over next year. “While still just 2 percent of company mix, this under-represents importance to driving iOS ecosystem, and app gross profit of $3.3B would already contribute 5 percent of Apple’s total, 2X its profit on iTunes and > 4X what it earns off iPods,” wrote Cihra via Street Insider.
As noted by Apple Insider, the analyst predicted that Apple’s new iPad models would boost Apple’s iPad sales by 16 percent next year. Cihra also predicted that Apple would launch a larger, so-called “iPad Pro” in 2014 that would mirror the company’s MacBook lineup. Cihra’s iPad Pro prediction is in line with a supply chain rumor reported by the Korea Times last month. According to the Korea Times’ source, an iPad with a 12.9-inch screen will be released “sometime early next year.”
Finally, Cihra also weighed in on the impact that Apple’s upcoming distribution deal with China Mobile (NYSE:CHL). The analyst believes that a partnership with the world’s largest carrier could add between 15 to 20 million iPhone unit sales for Apple in calendar 2014, reports Street Insider. Here’s how Apple has traded today.
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