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Apple has the chance to be a $1.5 trillion behemoth, analyst says (APPL)

Ethel Jiang
iPhone XR
iPhone XR

Justin Sullivan/Getty Images

  • Apple's valuation can approach the $1.5 trillion level, Wedbush analyst Daniel Ives said Friday.

  • Apple released three new iPhone models in September and discontinued all other older versions, which can help capture the underlying demand among customers that have decided to bypass previous models, Ives said.

  • China consumer demand is a key driver, he added.

  • iPhones, Apple Watches, and wireless AirPod headphones are not included in President Donald Trump's tariffs on $200 billion worth of Chinese imports. 

  • Watch Apple trade in real time here.

Apple shares are compelling over the coming year, Wedbush says. The firm initiated coverage of Apple with a $310 price target — more than 40% above where shares were trading Thursday — and added the stock to its "Best Ideas List."

"Apple's valuation can approach the $1.5 trillion level based on our analysis of the monetization potential of its unparalleled consumer installed base over the coming years coupled by further multiple expansion around the services business," Wedbush analyst Daniel Ives said in a note sent out to clients on Thursday.

The smartphone maker released three new iPhone models — XS, XS Max, and XR — in September, and discontinued all other older versions. This arrangement shows Apple is determined to catalyze fence-sitting iPhone customers onto their next smartphone, capturing the underlying demand and upgrades among customers that have decided to bypass previous models, Ives said. 

And China consumer demand is a key driver.

"We estimate between 60 million and 70 million Chinese iPhones will be in the 'upgrade window' over the coming year with iPhone’s next generation trifecta of smartphones as a major potential product catalyst in the all important Chinese market, which could see a renaissance of growth on the horizon for Apple despite lingering worries around the overall China market given current tariff and trade tensions," he added.

President Donald Trump's latest round of tariffs — on roughly $200 billion worth of Chinese imports — did not include the iPhone, Apple Watch, or wireless AirPods headphones

But Ives added that as trade worries hang around the Wall Street, and possible supply-chain disruption remain unclear, investors need to keep a very close eye in the coming months. The tech giant said in July when posting its second-quarter results that there were some signs of slowing growth in its key device businesses. 

Apple is set to report third-quarter earnings on November 1, with analysts surveyed by Bloomberg expecting earnings of $2.77 per share on $61.3 billion of sales.

Apple stock was up 27% this year through Thursday.

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