Shares of Apple (AAPL 5.98%) rose sharply on Monday as two analysts said they believed pre-orders for the newest iPhone models were looking good. Some investors may have worried that the new iPhone models, without any major changes to their form factors, would fail to provide sufficient catalysts for a meaningful upgrade cycle from smartphone users. But according to Wedbush analyst Daniel Ives and Bank of America analyst Wamsi Mohan, pre-order demand for the latest Apple smartphones is promising.
Furthermore, both analysts are bullish on the stock. The more bullish of the two analysts, Ives, has an aggressive 12-month price target for the tech stock of $220. Impressively, this represents about 34%. A one-year return like this would not only be rewarding for shareholders, but likely even market-beating.
The bull case for Apple stock
Mohan and Ives, who have $185 and $220 12-month price targets for Apple shares, respectively, both cited the same data to support their optimistic notes to investors Monday morning. The stated delivery timeframes for orders of new iPhones on Apple's website are pushing out further (at a faster rate) than they were with previous-generation iPhone models, the two analysts say. This is true for both Apple's own website and mobile carrier websites, Mohan said.
Mohan added that a push-out of ship dates globally is particularly impressive, given that the company rolled out some price increases for its iPhone lineup in regions where the strong U.S. dollar is working against the company.
Another reason to consider giving weight to the growing lead times for iPhone shipments as a bullish indicator for the company is that supply shortages are less likely to be as big an inhibitor to sales this time around. This time last year, supply chain challenges were having a massive effect on the company's ability to move product. This made extending shipment times less relevant as a demand indicator. Going into Apple's holiday quarter last year, the company said in its fiscal 2021 fourth-quarter earnings call that it expected supply constraints to negatively affect revenue by $6 billion or more.
But management said in its fiscal 2022 first-quarter earnings call that constraints for the period ended up being even worse than expected. Since then, Apple has generally been saying that supply constraints have been improving, with Apple's last reported quarter's constraints actually being less than management had anticipated for the period.
The iPhone 14 Pro and Pro Max. Image source: Apple.
With ship times for new iPhones slipping even faster and further than last year in many markets, while the company's supply chain challenges are seemingly easing, Mohan and Ives may be right to be bullish on the stock. Demand for the new iPhones really might be robust enough to drive substantial sales growth for the company.
iPhone sales are key
While some investors might believe it's shortsighted to read into slipping ship times for iPhone sales, it's important to note that demand indicators for new iPhones say a lot about the company's current state and its future potential. First and foremost, it suggests that Apple's largest product line remains attractive to consumers globally. Second, it implies that the latest iPhones could achieve strong sales not just this quarter, but throughout fiscal 2023. Historically, strong initial demand for new iPhone lineups has been proven to provide a glimpse into how demand for the devices could fare throughout the year.
Still, investors might be wise to refrain from materially adjusting their thesis on the stock yet. The most surefire way to gauge how well the new iPhone lineup is performing is to wait until Apple reports its fiscal fourth-quarter results. While sales of the latest iPhone models will only account for a few weeks of the fiscal quarter's sales, management will likely provide some useful commentary on how demand is faring.
Whatever the case, the data cited by these two analysts is at least promising. Furthermore, Apple shares were arguably already looking undervalued anyway, so this new data just strengthens an already strong case for owning the stock.
