Pacific Crest Securities, a leading technology investment bank, gave a major boost to Apple Inc.’s (NASDAQ:AAPL) stock prices with a series of bold predictions about the future releases and performance of the Cupertino, CA based firm. Like many other industry analysts, Pacific Crest believes that Apple’s share prices are stubbornly underpriced, pegging their true value at around $635. Much of this optimism is founded on several assumptions about the next iPhone, though whether these projections are based on mere guesswork or inside information is unknown.
Andrew Hargreaves, the Pacific Crest analyst who prepared the report, asserted that Apple Inc. (AAPL) had lost some market share to Android devices because of its smaller screen size, with all current iPhone models featuring screens of 4 inches or below. He is confident that the next iPhone, which may be dubbed the iPhone 6 or the iPhone Air, will feature a screen measuring at least 4.7 inches. This would make it competitive in size terms with Android smartphones and siphon back a number of lost customers, as well as making the iPhone more appealing to first time buyers, according to Mr. Hargreaves.
Pacific Crest expects the new Apple (AAPL) iPhone to have a subsidized price of $299. With this price point and the larger display noted above, the analysis firm claims that Apple could expect a 10 percent slice of the over-4-inch smartphone pie, which could be immensely profitable for the firm. This could add a full $4 in earnings per share to 2014 dividends, thus leading to increased shareholder confidence and a rise in stock prices of up to $100 per share.
The announcement itself was enough to cause a slight rise in Apple’s share prices during morning trading today, after a period of rather listless interest in the California tech company’s stock. The stock opened considerably higher than Monday’s close and has remained above the opening price despite the expected fluctuations.
Some believe that Apple (AAPL) might produce an even larger iPhone, with a screen of 6 inches or even larger. This would represent an effort to break into the phablet market, in which hybrid phone/tablets are all the rage. However, cooler heads such as those of Ming-Chi Kuo, a well-regarded analyst, deem this unlikely because of Apple’s commitment to one-hand use of its smartphones. Due to the structure of the human hand, a smartphone of more than 5 inches screen size cannot be effectively used one-handed, and thus is unlikely to appear in Apple’s lineup.
Fortunately for those who want to go long on Apple shares, it won’t require such a huge growth spurt in screen size to prompt a robust growth in share prices, according to Pacific Crest. 4.7 inches should be enough to satisfy people with a hankering for big screens, and to yield a notable harvest of cash for the company and investors alike.
