Apple is getting an upgrade.
Andy Hargreaves at Pacific Crest upgraded Apple to "outperform" from "sector perform" and gave it a $635 price target.
The reason for the
upgrade: Apple will release a 4.7-inch iPhone 6 in the fall. Apple will
charge $299 for the phone on-contract, which is $100 above what it
charges for the iPhone 5S. That will boost sales and earnings.
Apple consumers are relatively rich, so $100 doesn't mean too much to them. The failure of the iPhone 5C as evidence that Apple's customers don't mind spending an extra $100 for a better product.
Apple released the
iPhone 5C, which cost $100 with a two-year contract. The iPhone 5S was
$200. Over the life of a phone, which is two to four years, that $100
isn't all that much. As a result people skipped the 5C for the better
5S.
Because Apple customers
have shown they don't mind paying a slight premium, and also Apple can
charge $100 more for the newer, bigger phone. We know that Samsung charging $299 for the Note, a bigger 6-inch phone, as evidence that you can charge more for a big phone.
Apple does two big
phones this year. Expecting a 4.7-inch iPhone and not an additional
5.5-inch iPhablet like some were speculating would happen.
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