'Strongest product cycle' in years leads Wedbush to hike AAPL target to $160

In a note to investors seen by AppleInsider, lead analyst Daniel Ives says that the bank is seeing "a clear tick up" for demand around both iPhone 12 Pro and iPhone 12 Pro Max, with the former model turning out to be the "star of the show."

Order activity has been ramping up over the past few years, Ives says, which has given the bank incremental confidence in its 5G iPhone "supercycle" thesis. The analyst is modeling 80 million iPhone 12 units in the initial launch period, with a stretch goal in the high 80 millions. That's up from Ives' late October forecast of 75 million iPhone units, and even further up from previous estimates of 65 to 70 million.

"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," Ives writes.

Based on lead times and supply chain checks, Ives says that pre-orders appear to be tracking two times higher than the iPhone 11 lineup thus far. It's "a robust start out of the gates for Cupertino on this flagship supercycle product."

Although Wall Street estimates are currently forecasting 215 million iPhone units shipped in 2021, Ives believes the current trajectory could result in a bull case for Apple. That could see the company ship upwards of 240 million iPhone units, breaking the previous record of 231 million units sold in 2015.

China is still a "key ingredient" to Apple's success, and Ives estimates that the company will see 20% of its iPhone upgrades coming from the region over the next year. Heading into the holiday timeframe, the analyst is seeing considerable strength and positive upward trends.

"In a nutshell, while services growth remains the key to the Apple re-rating story over the past six months, the hearts and lungs of the Apple growth story are built around iPhone installed base upgrades. With 5G now in the cards and roughly 40% of its 'golden jewel' iPhone installed base not upgrading their phones in the last 3.5 years, Cook & Co. have the stage set for a supercycle 5G product release," the analyst writes.

Ives is raising his 12-month price target to $160, up from $150. That's based on a sum-of-the-parts valuation on Wedbush's 2022 AAPL fiscal year estimate, which breaks down to a 15x multiple on Services at $1.1 trillion and a 6.5x multiple on the rest of Apple's hardware business at $1.7 trillion.

The analyst has also bumped his bull case to $200, which results from raising those 2022 estimates to $1.3 trillion for Services and $2.2 trillion for Apple's hardware business.