#Merrill Lynch and Goldman Sachs upped their price targets on #Apple $AAPL , while reiterating their Buy ratings on the shares, citing the potential for new products and “significant upside” in iPhone Average Selling Price, or ASPs.
NEW CATEGORIES: In a research note to investors, Bank of America Merrill Lynch raised its price target for Apple to $180 from $155. While noting that last year Apple accounted for 10% of global consumer spending, the analyst told investors that he believes the markets that the company currently addresses can be about $550B in 2020 and close adjacencies can be $300B. This excludes potential Total Available Market, or #TAM, from healthcare and automotive, he pointed out. He also noted that given the iPhone maker’s “immense” net cash, Apple can easily enter most markets through M&A.
Moreover, the analyst argued that new products and categories add to its already “significant” growth opportunity in its existing areas, and that ignoring the “shadow TAM” of new product opportunities understates Apple’s true potential. The analyst believes the tech giant still has room to grow and gain share in the traditional areas of smartphones, tablets, wearables and desktops/laptops, while new areas to explore include game consoles/handheld games, cameras/camcorders, DVD players/Blu-ray players, set-top boxes, streaming audio and video services, wearables, TVs/HDTVs and Virtual Reality.
HIGHER IPHONE PRICES: Meanwhile, Goldman Sachs was also bullish on Apple this morning, raising her price target on the shares to $170 from $164 ahead of the upcoming iPhone 8 product cycle. The analyst told investors in a research note of her own that she sees “significant upside” in iPhone ASPs, expecting the 128GB model to be priced at $999 and the 256GB at $1,099. Given the analyst iPhone SKU analysis, the analyst believes the iPhone 8 will drive well over 50% of total new iPhone shipments in the first four quarters.
Based on the higher mix and ASP of the iPhone 8, the analyst also estimates blended iPhone ASPs to be up 16% year over year in FY18, and sees a relatively modest 40bp headwind to iPhone gross margins in 2018 as additions to the bill of materials and higher memory costs are largely offset by the expected $130 ASP increase in the iPhone 8.
PRICE ACTION: Since start of the month, shares of Apple more than $11. They last traded at $156.10. Earlier in the session the stock hit an all time high of $156.42 per share.
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