Jefferies analyst Peter Misek has upgraded his Apple (NASDAQ:AAPL) rating from a “Hold” to a “Buy” and boosted his price target from $425 to $600, reports Fox Business. The analyst made the changes after returning from a weeklong trip to Asia where he toured various Apple suppliers.
According to Misek, his meetings with Apple’s suppliers “indicated a substantial shift in attitudes towards Apple.” Last month, Misek’s supply chain sources indicated that there were “terrible” yield issues with the new fingerprint sensor found in the iPhone 5S and he lowered his price target on Apple stock from $450 to $425.
However, this time the analyst learned that suppliers in Asia are now “far more lenient on price,” which has allowed the iPhone maker to boost its gross margins. “We now believe better GMs [gross margins] will allow Apple to skate by until iPhone 6 launches with its 4.8-inch screen,” wrote Misek. Last month, the Wall Street Journal cited insider sources that said Apple was developing an iPhone with a screen size ranging between 4.8 and 6 inches.
Based on the information Misek gleaned from Apple’s suppliers, Jefferies raised its fiscal year 2013 EPS from $39.66 to $39.87 and fiscal year 2014 EPS from $37.95 to $44.22, reports Street Insider. The analyst also increased his 2014 gross margin target from 36.3 percent to 39.8 percent.
Misek’s Apple upgrade follows a recent price target increase from BMO Capital Markets analyst Keith Bachman. Like Misek, Bachman cited Apple’s increased margins as the reason for raising his price target from $480 to $508. However, Bachman cited the iPhone 5C’s higher-than-expected average selling price as the reason for Apple’s increased margins, rather than lower supplier costs.
Here’s how Apple traded over the past five trading sessions.
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