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Are Expectations Inflated For Apple's iPhone 12 Smartphones?

Apple stock has surged to record highs on anticipation for the company's 5G iPhones due out this fall. But at least one analyst thinks expectations are inflated for Apple's (AAPL) iPhone 12 series smartphones.

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In a note to clients on Friday, Nomura Instinet analyst Jeffrey Kvaal questioned the investor enthusiasm for a possible 5G iPhone upgrade supercycle.

"We are not certain a supercycle looms," he said.

Kvaal expects likely higher prices for the iPhone 12 smartphones to be "a barrier to adoption." He estimates that 5G components will add $40 to $80 to the incremental bill-of-materials cost for the new handsets.

"No link in the value chain — consumers, suppliers, operators, or Apple itself — is likely to shoulder that cost burden," Kvaal said.

Meanwhile, Apple is seeing strong demand for its current iPhone 11 series handsets, he said.

"Strengthening iPhone demand through fiscal Q1 and sturdy first-half orders imply the iPhone 11 cycle will remain solid through fiscal 2020," Kvaal said. Apple's fiscal 2020 ends on Sept. 26. But "inflated iPhone 12 expectations may make the music stop," he said.

Apple Stock Nabs Price-Target Hikes

Kvaal reiterated his neutral rating on Apple stock but raised his price target to 280 from 225. Apple stock rose 1.1% to close at 318.73 on the stock market today, an all-time closing high and a penny below its intraday high.

Elsewhere on Wall Street, Morgan Stanley analyst Katy Huberty maintained her overweight rating on Apple stock. She raised her price target on Apple stock to 368 from 296. She called Apple stock "a top pick."

"We expect Apple to continue to outperform hardware peers given smartphone replacement cycles have peaked," Huberty said. The average iPhone owner now is holding on to their handset for nearly 4 years, she said.

Earlier this week, Apple stock received price target hikes from analysts at brokerage firms Canaccord Genuity and UBS.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor companies.

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