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Apple Nears $3 Trillion. The Stock Won’t Stop There, J.P. Morgan Says.

People shop at the Fifth Avenue Apple Store during the launch of Apple’s new iPhone 13 and iPhone 13 Mini in New York.

Spencer Platt/Getty Images

Apple stock was rising Monday after J.P. Morgan raised its 2022 price target to a Wall Street-high of $210, up from $180, as the tech giant looks poised to become the first company to pass the $3 trillion benchmark.

The stock likely won’t stop there, fueled by growing services revenue and iPhone 13 upgrades, analyst Samik Chatterjee wrote Monday. Apple (ticker: AAPL) is Chatterjee’s top pick for 2022. While iPhone 13 sales already have been strong, Chatterjee believes most of the revenue and earnings upside are still to come, prompting him to reiterate an Overweight rating on the stock.

Apple shares were up 1.2% to $181.66 in premarket trading Monday, and have gained 35% this year alone.

One of the underlying keys to Apple’s 2022 growth will be the launch of the budget-friendly 5G iPhone SE model, which could drive substantial upgrades from consumers and lure in Android users looking to upgrade to a 5G phone. Chatterjee foresees the 5G SE launch sometime in the first half of 2022

“We believe the focus on the iPhone 13 demand and supply situation is driving investors to underappreciate the relevance of the 5G iPhone SE to the FY22 product cycle,” he wrote in a Monday research note.

The 5G SE launch will help target the mid- to low-end 5G smartphone market, which currently has relatively low market penetration, he added. The model, which will likely be priced at around $399, could target at least 300 million current iPhone users looking to upgrade, and about 1.4 billion non-Apple users looking to take the plunge and switch over to an iOS device, Chatterjee calculates.

Chatterjee forecasts that Apple will sell around 30 million units of the iPhone SE model during its launch next year, contributing about $10 billion of revenue. As a result, overall iPhone sales are slated to increase, prompting the analyst to raise his overall iPhone sales forecasts to 250 million iPhones, 10 million more units than in 2021.

Wedbush analyst Dan Ives estimates that Apple will sell a little more than 40 million iPhones during the holiday season despite chip shortage headwinds. The analyst calculates that roughly 250 million out of 975 million iPhones worldwide have not been upgraded in 3.5 years, driving a strong upgrade cycle that plays out in favor of the iPhone 12 and 13.

“We view supply-chain issues as nothing more than a speed bump on a multi-year iPhone 12/13 supercycle,” Ives wrote in a note.

Although iPhone demand will be a key driver for 2022, the company’s growing services segment will also help propel Apple past the $3 trillion market cap value, Ives said. The services business could be worth as much as $1.5 trillion alone, he added.

Apple is also likely to launch an augmented reality headset in 2022, which could add around $20 a share to the company’s valuation, given the “massive market opportunity and tapping the broader metaverse ecosystem,” Ives wrote.

Write to Sabrina Escobar at [email protected]

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