Canaccord ups AAPL target to $355 on strong iPhone 11 demand, 5G upgrade cycle

Services revenue, anticipation of a 5g "iPhone 12" in 2020, coupled with surveys demonstrating strong current iPhone 11 demand has led Canaccord Genuity to set a $355 price target on Apple stock.

In a research note to investors seen by AppleInsider Canaccord Genuity analyst T. Michael Walkley is seeing strong demand for the iPhone 11 series. Furthermore, Walkley is predicting record Services revenue, supported by an installed base that exceeds 1.4 billion devices globally. This is predicted to be supplemented by the "iPhone SE 2" early in 2020, coupled with a 5G upgrade cycle in late 2020, driving further demand through 2021.

As a result of both the low-cost iPhone and that 5G "iPhone 12," Walkley has increased revenue estimates for the iPhone from $143 billion in calendar year 2020 and $147 billion in 2021, to $152 billion and $159 billion, respectively.

Apple's fortunes are further boosted by AirPods Pro demand still ahead of Apple's ability to meet supply, and an increasing demand for global wearables, including the Apple Watch. Because of these combined forces, calendar year 2020 Apple revenue estimates issued by Canaccord have been increased to $33.5 billion, versus $33.0 billion.

Walkley says that an overall increase in the overall PC market trend for the first time in many years is an overall boon for Apple. Apple is "well positioned for strong trends" across all of its business lines given that growth, according to the analyst.

The big story, however, is Services revenue. Walkley believes that Apple will "sustain Services revenue momentum following a record 2019" and will double 2016 revenue by 2020. Even though Apple TV+ is free now, the pricing of Apple TV+ after that free period versus competitors is cited as a future point of revenue for the company. Additionally, Apple Arcade will drive growth, with both the service as a whole, and the games individually, getting positive initial feedback from users.

Cannaccord Genuity's previous price target was $275, with a 16x multiple to earnings per share. Wednesday's research note increases the multiple to 20x, with a target stock price of $355.

Apple stock is presently $313.61 per share, up 0.30% on the day. On January 15, 2019, Apple stock was valued at $153.07.