Brokerage firm HSBC initiated coverage of Apple (AAPL) stock on Wednesday with a buy rating, saying Apple's large base of loyal iPhone users "can't wait" to get their hands on the upcoming iPhone X.
X HSBC analyst Steven Pelayo predicted a strong iPhone upgrade cycle as well as growing Apple Watch sales.
Pelayo set a 12-month price target of 193 on Apple stock. Apple shares fell 0.4% to close at 156.41 on the stock market today.
"We believe a very large installed base of loyal, yet patient users can't wait to get their hands on iPhone X," Pelayo said in a note to clients. "Unit growth will be driven by the large and loyal installed base of users (approximately 600-700 million) that have patiently been waiting for more differentiated products such as the iPhone 8 series, and in particular the iPhone X (and follow-up models)."
Apple should be able to work out supply constraints for the iPhone X by the end of the first quarter, he said. The iPhone X goes on sale Nov. 3, after a week of preorders beginning Friday. The handset is expected to be in short supply at first because of production snags related to certain new components.
IBD'S TAKE: Apple stock has been forming a cup-with-handle base over the past seven weeks. For more technical stock analysis, read the article "Apple Has New Buy Point."
Pelayo predicts that iPhone sales will rise 13% to 247.5 million units in calendar year 2018, with average selling prices climbing 12% as customers choose higher-end handsets.
He forecast Apple Watch unit sales growth of 20% in the next calendar year, with average selling prices rising 8%.
Pelayo believes innovation is alive and well at Apple and expects the company to adopt new technologies such as foldable screens, artificial intelligence, augmented reality and 5G wireless.
RELATED:
