Shares of tech giant Apple Inc (NASDAQ:AAPL) gained $0.37, or 0.33%, at $115.60, bouncing back from a drop below $115 support level at the beginning of Wednesday’s session last week following a report from Citigroup (NYSE:C) analyst Jim Suva who lists five reasons why Apple stock rises in fiscal year 2017.
The analyst’s list starts with an attractive valuation for the equity. Suva, who has a ‘Buy’ rating on Apple shares with a $130 price target, sees AAPL as undervalued and trading at “a slight discount to [its] 4-year median multiples despite improving fundamentals ahead”. The next variable he points to is an iPhone 8 “super upgrade cycle,” which is already rumored to include three new iPhone models, including the rumored high-end OLED model with a screen sized between 5.1 and 5.2 inches and that all three are said to be featuring wireless charging for the first time, along with glass-backed cases.
Next comes benefits from tax reform, or the Trump-bump. The President-elect has indicated he wants to lower taxes on corporations overall and on cash U.S. companies have stashed overseas. Suva calculates that if the policy was to be implemented, which would see corporate rate dropping to 15% from the current 35% level, that alone could boost Apple’s EPS by 6 percent while a cash repatriation holiday and share buyback could drive an incremental 10% benefit.
“Across our coverage universe, we see Apple as a significant beneficiary of Trump tax reforms,” Suva notes, adding Cupertino “is very well positioned to benefit from potential tax reform of either or both a repatriation tax holiday and or a lower corporate tax rate.”
It should be noted that Apple has a massive $216 billion that have never been taxed by the U.S. government as of the end of September.
Continued “Services” growth – one of the fastest growing revenue streams at Apple – from a “sticky” user base and growth in the enterprise as Apple increases it partnerships are seen as the fourth and fifth possible boosts for Apple’s stock price.
In other Apple news, Canaccord Genuity’s Mike Walkley cut his 2017/March-quarter estimate last week to 53 million iPhone units from 56 million, and 2017/June estimate to 44 million units from 46 million. The analyst cites slowing sales following a shift back to Google-parent Alphabet’s (NASDAQ:GOOGL) Android software by some smartphone users, including the recently introduced “Pixel” prime handset from the search giant itself. Walkley notes however, things are looking bright for 2017’s presumed iPhone 8.
The analyst reiterates a ‘Buy’ rating on Apple stock and a $140 price target, implying 21% expected return. Shares of the iPhone maker closed at $116.64 a share in Monday’s trading session. In early trading this morning ticker has gained 45 cents, trading at $117.10.
Apple, currently valued at $628 billion, has a median Street price target of $133 with a high target of $185. The name prints a one year return of about 10%, and a year-to-date return of around 11%.