Cowen & Company analyst Timothy Arcuri thinks Apple's smartphone sales will remain strong this year and the upcoming iPhone 6 will drive those numbers up enough to warrant bumping his target price for the company's stock from US$90 up to $102. He said Apple has been able to maintain strong sales despite the fact that it doesn't offer a smartphone with a larger screen, although that's expected to change this fall with the launch of the iPhone 6.
Mr. Arcuri expects Apple will be able to build and sell the iPhone 6 in big numbers this year. In a note to investors he said his checks indicate Apple could build 100 million smartphones before the end of the year.
With the current user base that didn't upgrade to the iPhone 5 Mr. Arcuri expects this will be a big sale year for Apple. He said, "We estimate [about] 140 million unit installed base of pre-iPhone 5 for which LTE-A and a larger screen represent a compelling upgrade case especially given ecosystem loyalty."
The iPhone 6 is expected to sport a redesigned body that matches the iPad mini and iPad Air with 4.7-inch and 5.5-inch screen options. The new models will be thinner, may include higher quality cameras, are expected to run faster processors, and could use Apple's own synthetic sapphire glass instead of Corning's Gorilla Glass for the display surface.
We still see evidence of both Gorilla Glass and Sapphire for 4.7-inch version but feel at least one (if not all) versions of larger 5.5-inch version will be Sapphire. Although pricing should be 'tiered,' margins remain a much bigger question to us than iPhone 5S/5C launch which was clearly good margins.
While Mr. Arcuri raised his target price to $102, he is maintaining his "Outperform" rating for Apple's stock. Apple is currently trading at $91.96, down 0.24 (0.26%).
[Thanks to StreetInsider for the heads up.]