martes, septiembre 12, 2017



Apple’s Trillion Dollar iPhone

Apple’s market value has surged in anticipation of a strong cycle, which makes further upside more challenging

By Dan Gallagher

A customer at an Apple Store in Chicago compared her iPhone 6, left, with a jet black iPhone 7 in September 2016. The company is expected to unveil its latest iteration of the iPhone on Tuesday. Photo: Kiichiro Sato/Associated Press        

Only Apple Inc. AAPL -1.63%▲ gets to decide what to charge for its new iPhone, but investors will get to decide what the new flagship is worth. That could be a trillion-dollar question.

The market value of the world’s most valuable company already has surged 35% this year, to around $820 billion, ahead of Apple’s expected introduction of the new iPhones on Tuesday.

That means the stock needs to gain another 22%—to about $193.70—to get Apple’s market value to the $1 trillion mark. And, while its heavy dependence on the iPhone has made Apple’s stock rather cyclical over the last five years, the price tends to go up instead of down in the immediate months that follow a new launch of new devices.

The comparison that most readily springs to mind is the iPhone 6. Apple’s stock price had jumped nearly 30% over the previous six months by the time that version was introduced on Sept. 9, 2014. A larger screen kicked off a strong upgrade cycle that drove iPhone unit sales up 37% for the subsequent fiscal year and the stock up another 30% over the next six months.

But there are no guarantees of a repeat performance this time around. Apple is expected to introduce three new phones at an event on Tuesday. Two are believed to be incremental updates to the current iPhone 7 line, while another is expected to be a redesigned phone with a curved, edge-to-edge display similar to this year’s Galaxy lineup from Samsung . Production issues with the new design could push the launch of that model later into the year.

Apple also is expected to charge a much higher price for the new phone—possibly $1,000 or higher. That would help offset soaring prices for key components such as memory and displays.

It also could crimp demand if consumers find the price too rich.

Clarity on those points from Tuesday’s presentation will help investors better assess the new phone’s potential. Analysts already expect the bulk of the new iPhone cycle to show up in Apple’s results for the next fiscal year, which begins in October. Total revenue is expected to hit a record $261 billion in fiscal 2018, with a 13% jump in iPhone unit sales expected. Apple’s per-share earnings for the year are expected to be $10.82—20% higher than Wall Street’s forecast for the current fiscal year.

Apple’s stock currently trades about 14.7 times 2018’s projected earnings, which is already on the high side of its 5-year range. A market cap of $1 trillion would represent nearly 18 times forward earnings based on current estimates, which is well above the stock’s peak multiple. Apple remains the cheapest of its Big Tech peers—especially when accounting for its $165 billion of net cash—so a strong iPhone cycle could give the stock some additional upside. But investors should be aware that much has already been dialed in.

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