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Can Apple Sell 350 Million iPhone 12s in the 5G Upgrade Supercycle?

24/7 Wall St. logo 24/7 Wall St. 10/20/2020 Jon C. Ogg

a hand holding a cell phone © Provided by 24/7 Wall St. The investing world has seen Apple Inc. (NASDAQ: AAPL) turn into the greatest story of a lifetime. After having an existential issues in the 1990s, Tim Cook's journey in the post-Steve Jobs era has allowed Apple to become the largest company in the world. Whether the stock was over-purchased on the way up after the split or not, Apple is the only company worth $2 trillion.

The one thing that has not changed about Apple in the last decade is that the company's story still remains firmly pointed toward the iPhone. Beyond the App store, the watch, iPads and Macs, analysts and investors alike weigh the iPhone refresh cycles more than any other product to date.

With the iPhone 12 coming soon and looking massive 5G demand, one analyst team now sees Apple selling 80 million (or more) iPhone 12's in the initial launch period alone. Daniel Ives of Wedbush Securities currently rates Apple as Outperform, and his $150 price target currently implies 29% upside from the current $115.98 stock price.

While the long-term upgrade cycle forecasts are the same as a month earlier, this is an upgrade on the initial iPhone 12 units.

Ives and his team conducted Asia supply chain checks in recent days in an effort to forecast reasonable demand expectations. The initial reads support Ives' supercycle thesis on the iPhone 12. Those checks have shown that the supply chain is anticipating 80 million iPhone 12's for the initial launch period. Ives also sees a potential stretch up to the mid-80-million units.

What matters here is that this is already higher than the initial forecasts and higher than the prior adjusted forecasts. The Wedbush report said:

To put this in context, heading into last week we were anticipating 75 million units as the line in the sand and roughly a month ago this number was in the 65 million to 70 million range. We have not seen a launch uptrend such as this in a number of years for Apple and the only iPhone trajectory similar would be the iPhone 6 in 2014 based on our analysis.

The report further points out that pre-orders are looking to be more than double that of the iPhone 11 so far. The firm is also stronger demand for Apple's larger 6.7-inch model, and that raises the overall iPhone 12 expectations heading into the launch.

Wedbush's view for the supercycle is supported by some 350 million out of 950 million iPhones already around the world are currently of the age for an upgrade opportunity. And for what a supercycle looks like -- we believe this will translate into an unprecedented upgrade cycle for Apple.

One aspect that has to be considered, which brings risk and opportunity alike, is that China is said to still be a key ingredient in this launch. Ives expects that China will account for roughly 20% of iPhone upgrades, and the China region is also seeing considerable strength over the last few months.

Apple was recently listed as having one of the best potential earnings reactions for the Dow stocks, although this iPhone launch was a tad later than some had hoped.

Apple was trading higher by more than 2% at $118.50 on Tuesday afternoon. These gains are of course being driven on a day when stimulus talks have reportedly been positive, and Apple's all-time high in the wake of its split was $137.98.

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