Please ensure Javascript is enabled for purposes of website accessibility

Apple Stock: Headed to $250?

By Daniel Sparks – Sep 5, 2018 at 10:26AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Here's why this analyst is upgrading his price target.

Shares of Apple (AAPL 1.56%) have been surging recently. But one analyst from Canaccord Genuity thinks there's still more upside ahead for the stock, upgrading his price target for the tech giant to $250. Canaccord Genuity analyst Michael Walkley cited Apple's overall healthy iPhone business and the upcoming release of new iPhone models as catalysts for the stock.

While investors should take analyst commentary with a grain of salt, Walkley brings up a good argument for an Apple bull case. Though two of Apple's smaller and faster-growing segments -- services and "other products" -- have been receiving a lot of attention lately as important catalysts for further growth, investors shouldn't think Apple's smartphone business has tapped out. Indeed, iPhone has been performing exceptionally well lately.

An Apple customer holding the iPhone X on launch day.

Image source: Apple.

Getting to $250

Walkley's $250 price target, which represents about 9% upside from where Apple stock was trading at the end of the trading day on Tuesday, is meaningfully higher than the analyst's previous 12-month price target of $220. In addition, the target is particularly notable considering the stock has climbed 39% over the past 12 months.

"Given the strong consumer satisfaction with iPhones, we anticipate Apple will continue to grow its global share of the premium smartphone market," Walkley said in a note to clients on Monday (via CNBC). Specifically, Walkley said the rumored new iPhone lineup, which is expected to include three new models, will "help drive a continued strong upgrade cycle to higher margin and higher [average selling price] iPhones."

iPhone: Still Apple's bread and butter

Walkley's optimism for iPhone is easy to justify.

Apple's iPhone business has been crushing it. Trailing-12-month iPhone revenue has increased 13% year over year. In the company's most recent quarter, iPhone revenue increased an impressive 20% year over year. Growth like this really moves the needle for Apple since the iPhone accounts for more than 60% of the company's revenue.

Of course, there's always a concern Apple's iPhone revenue growth will come to a halt or -- even worse -- begin to decline. But there are signs consumers are just as eager as ever to choose iPhone in Apple's biggest market: the U.S. The iPhone's share of new smartphone activations in the U.S. was meaningfully higher in the second quarter of 2018 than it was the year-ago quarter, according to data from Consumer Intelligence Research Partners. iPhones accounted for 36% of activations during the quarter, up about 6 percentage points compared with the year-ago period. 

iPhone continues to do well globally, too. Apple's share of second-quarter shipments increased by nearly 1% year over year while Samsung's market share declined 10% during the same time frame, according to IDC.

The iPhone's rapidly rising market share over this period is a promising sign ahead of Apple's upcoming iPhone refresh. With demand looking healthy for iPhone, new models could fuel further market share gains.

Of course, Apple stock's conservative valuation combined with rapid growth in services and other products mean further growth in the company's smartphone business could just be icing on the cake.

Daniel Sparks owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.