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The Biggest Reason Apple Stock Is a Screaming Buy for 2022

By Harsh Chauhan – Dec 21, 2021 at 7:20AM

Key Points

  • Apple is reportedly working on a 5G-enabled iPhone SE.
  • The entry-level iPhone could help Apple attract new users and win share from Android rivals.
  • Analysts estimate that the device could boost Apple's shipments substantially and lead to more stock upside.

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The tech giant is preparing a big catalyst for next year.

Apple (AAPL -0.75%) stock has stepped on the gas in the second half of 2021, driven by impressive sales and earnings growth.

It's also benefiting from the tech titan's foray into emerging technology trends that seem to have boosted investors' confidence in its long-term prospects.

AAPL Chart

AAPL data by YCharts

However, one of the biggest reasons investors should consider buying Apple stock right now is an entry-level iPhone that could hit the market in 2022 and take the smartphone market by storm. Let's see what this new iPhone could be all about and how it could supercharge Apple's growth.

An entry-level 5G iPhone could be a big deal

Investment bank J.P. Morgan believes that Apple could be working on a 5G-enabled version of its entry-level iPhone SE device. Analyst Samik Chatterjee estimates that Apple could launch the 5G iPhone SE in early 2022 and give its massive installed base of users another reason to upgrade. Chatterjee estimates that the new device could help Apple tap into an installed base of 300 million users who are currently using older iPhones.

Person looking at a stock chart on a mobile phone.

Image source: Getty Images

However, J.P. Morgan points out that the bigger prize for Apple's 5G iPhone SE could be the 1.4 billion Android users who own low- to mid-end smartphones. That's because the 5G iPhone SE is expected to be the cheapest 5G-enabled iPhone that Apple will offer, with average selling prices anticipated to range between $269 and $399 after accounting for trade-ins.

For comparison, the cheapest 5G-enabled iPhone that consumers can currently buy is the iPhone 12 mini, which retails on Apple's website for a starting price of $599 before trade-ins. A cheaper device could help Apple bring more users into its fold from the Android universe. That's because the average selling price (ASP) of an Android smartphone is estimated to hit $261 at the end of 2021 as per third-party estimates, while Apple's iPhone reportedly commands an ASP of $950.

Moreover, the ASP of a 5G smartphone in 2021 stands at $643, according to estimates from IDC. The research firm estimates that 5G smartphone ASP could drop to $416 by 2025, so Apple would be making a smart move by launching an affordable 5G device to corner a bigger share of the 5G smartphone market.

It won't be surprising to see the idea of a 5G iPhone SE turn into reality, as J.P. Morgan isn't the first source to point out the potential existence of such a device. Noted Apple analyst Ming-Chi Kuo had pointed out earlier this year that the company's 2022 iPhone SE would be its most affordable smartphone. It would make sense for Apple to launch such a device considering that a budget-oriented 5G iPhone could help expand its wings in emerging markets as well.

Apple is expected to step on the gas in 2022

J.P. Morgan has raised its price target on Apple stock to $210 from $180, which implies a 23% upside from its closing price on Friday, Dec. 17. What's more, the investment bank has raised iPhone shipment expectations for Apple's fiscal 2022 to 250 million units, which would be a jump of 10 million units from the prior year. The projection includes potential shipments of 30 million units of the iPhone SE in fiscal year 2022.

More importantly, Apple seems to have shored up its supply chain after struggling to produce enough devices to meet end-market demand, because of coronavirus-related restrictions and component shortages last quarter. Goldman Sachs points out that Apple is now able to meet iPhone demand, which should help the company carry robust sales momentum into 2022.

Given the moves it's making to ensure that it remains a top player in the 5G smartphone era, Apple could sustain its recent stock-market momentum in the new year and turn out to be a top tech stock in 2022.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns and recommends Apple. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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