Apple, Inc. Stock Could Hit $635 on More Expensive, Larger iPhone

If you thought the iPhone 5s was expensive, just imagine a flagship phone that costs $100 more. One analyst believes a move like this could boost Apple's stock price.

Mar 11, 2014 at 10:00PM

Apple (NASDAQ:AAPL) stock could hit $635 in 12 months, says Pacific Crest Securities analyst Andy Hargreaves. That would give investors an 18% return at today's prices. His reason for the bullish outlook? A 4.7-inch iPhone with a subsidized price of $299, $100 more than the price for the iPhone 5s. While his speculation is certainly bold, the underlying assumptions are reasonable.

The case for a larger iPhone
There have been rumors that Apple is, indeed, developing a larger iPhone to launch in another bifurcated iPhone product release this fall. While it seems difficult for iPhone users to imagine a larger iPhone, designer Sam Beckett recently made an excellent case for the device in a concept video, dubbing the smartphone iPhone Air.

Despite the concept phone's 17% larger display than the 4-inch iPhone models, the actual phone in the concept is just 8% larger than the existing iPhone 5s. Designing with circulating rumors in mind, Beckett assumed that side bezels and the top and bottom of the frame could be slimmed down thanks to a sapphire crystal display.

Hargreaves believes Apple could position the iPhone Air as a more expensive device than the current iPhone 5s pricing. The fact that Apple's cheaper iPhone 5c didn't have an adverse effect on iPhone 5s sales, he says, is a sign that consumers are willing to pay more for premium smartphones. The notion goes entirely contrary to the industry trend to sell cheaper smartphones.

How Apple gets to $635
Hargreaves justifies the $635 price target by saying that the more expensive iPhone could reasonably capture 10% of the existing jumbo-sized phone market (smartphones larger than four inches) and add as much as $4 in earnings per share in 2014. That would boost EPS by about 9%. At $635, Apple stock would trade at a price-to-earnings ratio of 14.3, slightly higher than its price-to-earnings ratio today of 13.3.

AAPL PE Ratio (TTM) Chart

AAPL P/E Ratio (TTM) data by YCharts

While Hargreaves makes some good points about a larger iPhone and its meaningful potential on Apple's bottom line, there is a broader takeaway for investors from Hargreaves analysis. His scenario highlights the low downside risk to the value proposition for Apple stock at these conservative levels. Really any significant new product with meaningful success could positively impact the stock. And investors are in the fortunate position to know that the company is introducing new product categories, thanks to comments form Apple CEO Tim Cook. That said, Hargreaves price target of $635, in light of a rumored iWatch, revamped Apple TV, and a larger iPhone, seems sensible.

Of course Foolish investors shouldn't think in terms of twelve-month price targets, instead opting for an even longer-term time horizon. But the risk profile outlined for this market leader by Hargreaves is certainly enticing.

Three stocks for investors with a Foolishly long-term time horizon
It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.

Daniel Sparks owns shares of Apple. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers