Why Apple Is Worth $230 Per Share

We have increased our price estimate for Apple (NASDAQ:AAPL) from about $194 per share to $230 per share, to account for a strong revenue cycle over FY’19 driven by the company’s three new iPhones, continued strong Services momentum and expected updates to popular products such as the iPad and MacBook lineup over the holiday quarter. Below, we outline some of the key trends driving our price estimate for the company.

View our interactive dashboard analysis on What’s Driving Our $230 Price Estimate For Apple. You can modify any of our key drivers and forecasts to gauge the impact on the company’s valuation and arrive at your own price estimate.

iPhone Update Will Drive Strong FY’19 Revenue Cycle

Apple launched three smartphones including a refreshed iPhone X, called the iPhone XS (starting at $1,000), a new plus-sized version called iPhone XS Max ($1,100) and a relatively more affordable 6.1 inch LCD version called the iPhone XR ($750). While we don’t expect the new lineup to drive unit volume growth to the levels seen during the iPhone 6 cycle, due to a mature smartphone market, revenues should still see a very healthy jump due to a continued uptick in average selling prices, with mid-range iPhone customers likely to upgrade to the XR and premium buyers likely opting for the new iPhone XS Max (top models cost $1,450) . Gross margins could also stabilize after about a year of negative movement, due to more mature production processes for the iPhone X form factor and more mainstream components used on the new XR. We project that iPhone ASPs will rise by 5% to about $780 in 2019, with shipments rising by 7% to 238 million units.

The company’s other products should also see reasonable growth over the next fiscal year. Apple’s Services business should also remain strong, driven by the app store and subscription services including Apple Music and iCloud. Over Q3, the company indicated that it had over 300 million subscriptions on its platform, marking an increase of over 60% over the last year. The Apple Watch could also begin to play a more meaningful role in Apple’s growth, driven by the new Series 4, which marks the first overhaul of the Watch design since the original watch was introduced in 2014. Apple is also expected to update is iPad Pro lineup later in the fall, with an update to the popular MacBook Air laptop also expected. Although these products are not as lucrative as the Services and iPhone businesses, we believe that they are crucial to bolstering Apple’s ecosystem and driving long-term growth.