Apple (AAPL) held its first product event of the year last week, and as expected, the tech giant announced the third generation of its budget model - the iPhone SE. The latest iteration boasts 5G capabilities and comes with the same A15 chip found in the iPhone 13 lineup.
Evercore analyst Amit Daryanani is confident the launch will provide a “notable tailwind” for Apple, believing the company can ship more than 35 million units in its first year on the market.
“At a blended ASP of ~$450 or modestly higher given a higher base price, shipments at that volume could generate an additional ~$15-20B in annual revenues (approx. ~4-5% of total sales),” the 5-star analyst explained. “Assuming standard product operating margins, it could contribute ~25-30c to EPS (~4-5% of total EPS).”
Daryanani counts several reasons why he thinks the company can exceed that target.
For one, despite an 8% increase on the starting price compared to the earlier model – pricing starts at $429 – it is still on the “affordable side.”
Secondly, although Apple has not made much of a big deal over the fact the new model has 5G capabilities, Daryanani sees this addition as another factor which could “contribute to an uptick in unit volume.”
Additionally, a sizeable segment of iPhone users (e.g. iPhone 8 owners) have yet to upgrade their handsets. Apple directly compared the new SE to the iPhone 8 in the presentation in what appeared like an attempt to convince owners to upgrade.
Lastly, Daryanani thinks the latest SE’s growth can follow the trajectory of previous patterns. In the iPhone SE’s debut year, the company sold ~25 million units, while the second generation’s sales reached 29 million in its first year, amounting to a 16% uptick.
"In light of both historical patterns around the previous generations of the iPhone SE and our assessment of current demand for a more affordable iPhone, we think Apple could see substantial revenue contributions from the new SE, potentially reaching $15B or higher,” the analyst summed up.
In line with his optimistic approach, Daryanani stayed with the bulls, reiterating an Outperform (i.e. Buy) rating and $210 price target. Investors could be pocketing a gain of 36%, should this target be met in the twelve months ahead. (To watch Daryanani’s track record, click here)
Looking at the consensus breakdown, of the 28 AAPL reviews on record, 23 are positive, while 5 remain on the sidelines, all culminating in a Strong Buy consensus rating. The forecast calls for 12-month gains of 28%, considering the average price target stands at $193.36. (See Apple stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.