Why Wedbush raised its Apple price target to $225

Price cuts on the iPhone XR are working in China, says analyst Daniel Ives.

From a note to clients that landed on my desktop Tuesday morning:

China installed base is key for success going forward. Cutting prices in China on XR by up to 20% and pulling forward roughly 15 million-20 million iPhones (based on our estimates) over the next 3-6 months that would otherwise sit idle waiting for the next release, or worst case, move to lower priced competition is key as the last thing Apple can risk now is writing off an entire upgrade cycle in China. This dynamic has already started based on initial data points out of China over the last few weeks…

With lower-priced competition from all directions with Huawei/Xiaomi front and center, Apple needs to make sure they do not lose any current iPhone customers and thus speaks to the more significant price reductions on the way in the region ahead of the next major product cycle in September. This is a smart and necessary strategy for Apple as this is an installed base story going forward and core services growth will be driven off that premise for the next decade, with China a key ingredient in Apple’s future recipe for success.

Maintains Outperform rating, raises price target to $225 from $215.

My take: Ives’ new target might win him a slot on CNBC, but these run-on sentences are making my fingers itch.

3 Comments

  1. Aaron Belich said:

    Barring an unforeseen disaster, and unsuccessful FUD campaigns, I imagine AAPL will be pushing $500/share within 18-24 months. Hardware will be a near constant, perhaps some small growth every 2-3 years. Apple provided services will provide a growing revenue stream. New hardware / services will be built out, and the Cult of Apple will suck up the first few generations-regardless of issues. Then like clockwork, the public at large gets sucked in.

    0
    April 9, 2019
  2. Fred Stein said:

    Chinese New Years helped too.

    With services growing, Apple can take a margin hit on iPhones. China is (was) 20% of Apple’s revenue, with the XR being only one component of that 20%. COGS has likely declined a bit from last year. Netting all factors, we have negligible impact.

    0
    April 9, 2019

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