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Analysts on Wall Street are increasingly expecting an incremental iPhone hardware update this year, which has led some to turn their sights to a rumored 2017 handset revamp in hopes of pushing Apple stock to new heights.
Credit Suisse told investors this week that it expects Apple to see a "muted" upgrade cycle for the anticipated "iPhone 7," widely expected to launch in September. Instead, analyst Kulbinder Garcha has set his sights on the 2017 iPhone, which is rumored to have a major redesign coinciding with the product's 10-year anniversary.
Though Garcha maintained a $150 price target and "outperform" rating for shares of AAPL, he did cut his calendar year 2016 estimate to $7.80, and revised his calendar year 2017 EPS estimate downward by 5 percent to $9.67.
But a major redesign for the iPhone in 2017 has Garcha eyeing EPS of $12.32 in 2018. The new predictions were issued in a research note which was provided to AppleInsider.
Credit Suisse believes that this year's so-called "iPhone 7" will be a modest upgrade. Significant innovations are expected to be pushed out to the 2017 iPhone, which Garcha predicted will break convention and be named an "iPhone 8," rather than a "7s."
Rumors have suggested the 2017 iPhone will feature a curved glass case housing a 5.8-inch AMOLED display. It's also been said that Apple could embed many feature — including the Touch ID sensor, FaceTime camera, and speaker — into the display itself.
With major changes said to be in the works, Garcha believes the 2017 iPhone could result in Apple not only courting new users, but also cause an acceleration of upgrades for existing iPhone customers. As a result, Credit Suisse believes Apple will be in a position to increase its share of the smartphone market.
"We see a number of features and upgrades, including an OLED [organic light-emitting diode] screen, full glass display, no home button, enhanced Taptic Engine, improved camera, and wireless charging in the iPhone 8," Garcha wrote. "While this is some time away, we believe the iPhone 8 will be feature and specification rich. These features, coming potentially in September 2017 and even if in just a Pro version of the device, should drive an accelerated replacement cycle and draw in new users and should result in mix improvements."
As a result, Credit Suisse forecasts project Apple taking 39 percent of the general smartphone market, with sales of 250 million units in 2018. If the predictions prove true, that would be a 16.1 percent increase over the previous year.
Based on these factors and "solid risk reward arguments," Credit Suisse continues to call for a 12-month Apple valuation of $150 per share. As of Thursday, Apple stock was trading at just above $97, down considerably from a 52-week high of $132.97.