Apple Bull Case Puts $2 Trillion Valuation Within Reach By 2021 - Wedbush

Apple's market value could rise to $2 trillion by the end of next year, Wedbush analyst Dan Ives argues, as 5G network rollouts trigger a new 'super cycle' in iPhone sales.

Apple Inc.  (AAPL) - Get Report could be worth as much as $2 trillion by the end of next year, analysts at Wedbush said Tuesday, arguing that an upcoming 'supercycle' in iPhone sales from the rollout of 5G networks could lift shares past the $400 mark.

Wedbush analyst Dan Ives, who carries an outperform rating on the world's biggest tech company with a $350 price target, says Apple is in the early stages of a "massive upgrade opportunity", thanks in part to 5G network plans that will boost iPhone sales, which he thinks could rise to between 200 million and 220 million units. 

Revitalizing handset sale sales, Wedbush argues, alongside ongoing increases in services revenue, creates a "bull case" for a $400 per share valuation, a figure he says translations into a market capitalization of $2 trillion.

Looking out further, we believe by the end of 2021 Apple has potential to be the first $2 trillion valuation given the 5G tailwinds and services momentum potential over the coming years," Ives said. "The services business we assign a $500 billion to $650 billion valuation range given the increasingly importance of this key revenue stream that is getting a new appreciation by investors as (Apple CEO Tim) Cook & Co. further monetize its golden jewel installed  base of what we estimate is currently 925 million iPhones worldwide." 

"With roughly 350 million of these iPhones in the "window of an upgrade opportunity" we believe Cupertino has a unique opportunity to capture this super cycle opportunity with a major 5G cycle on the horizon which will include a host of new smartphone versions/models for iPhone 12," Ives added.

Apple shares were marked 0.3% lower in early trading Tuesday to change hands at $316.12 each, a move that would leave the stock with a 53.5% gain over the past six months.

Last week, Apple extended gains into fresh all-time highs after analysts at Credit Suisse boosted their price target for the iPhone maker, citing sharply improving sales in China.

Apple's December iPhone shipments in China rose 18.7% from the same period last year, Credit Suisse noted from data published by the country's Ministry of Industry Information Technology (MIIT), well ahead of the overall 13.7% decline in overall domestic smartphone sales. 

Reuters reported Thursday that data from the China Academy of Information and Communications Technology, as well as its own calculations, indicated shipments of around 3.2 million units in December, an 18% increase from the same period last year. 

Apple will publish its fiscal first quarter earnings on January 28, with analysts expecting earnings per share of $4.53 and overall revenues of $88.22 billion.

Apple said on October 30 that it sees December quarter sales in the region of $85.5 billion to $89.5 billion after it said fourth quarter services revenues grew 18% to a record $12.5 billion, offsetting the 10% gain in iPhone revenues, which hit $36.76 billion.

Apple's earnings for the three months ending in September, the final quarter of its 2019 fiscal year, fell 6.7% from the same period in 2018 to $3.03 per share, while group revenues rose 1.8% to $64.04 billion, thanks in part to a surge in wearable and home sales that offset another sales dip in China and the fourth consecutive quarter of declining iPhone sales.