Canaccord Raises AAPL Target on Demand for High-capacity iPhones

Demand for Apple's recently released iPhone 6 and iPhone 6 Plus still high, Canaccord Genuity analyst Michael Walkley is raising his target price for the company's stock from US$120 up to $135. That demand is targeted mostly at the higher capacity 64GB and 128GB models, which he says offer higher profit margins.

Demand for higher capacity iPhone models is driving up Apple's profitsDemand for higher capacity iPhone models is driving up Apple's profits

In a note to investors Mr. Walkley said interest in higher capacity iPhone models is good news for the company, and that consumers will likely continue to choose those over the base 16GB model for future upgrades.

He said,

Given the increasing content consumers use and store on their smartphones, we believe consumer preferences for the higher-ASP (versus 16GB) 64GB SKU will persist during future iPhone upgrade cycles leading us to increase our iPhone ASPs and overall estimates for [fiscal] 2015 and [fiscal] 2016.

Demand for the iPhone 6 and iPhone 6 Plus has remained high ever since it was introduced in September. Customers have been facing multi-week wait times for the higher capacity models, although currently those wait times are down to ten days for the 128GB models, and five days for the 64GB models on AT&T, Verizon, and Sprint.

Mr. Walkley's channel surveys show inventory for the 64GB and 128GB models has stayed constrained, while the 16GB capacities are easier to find. That said, Apple's online store is currently showing up to a five day wait time for the lower capacity models.

"While our surveys indicated most channels had ample supply of the 16GB SKUs for both the iPhone 6 and 6 Plus models," he said, "our surveys indicated the 64GB and128GB SKUs for both devices remain supply constrained."

Mr. Walkley's new $135 target price for Apple's stock comes with a "Buy" rating, and an 2015 EPS estimate at $8.13. Apple is currently trading at $114.90, down 0.17 (0.14%).