The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Apple Stock Forecast

Summary:

The September 12 product launch event of Apple will reportedly unveil the iPhone 8 and iPhone X smartphones.

The iPhone 8 and iPhone 8 Plus will likely be priced below $800 each. The iPhone X will go for $1,000 or more.

Investors should expect that the most expensive model, the iPhone X will find tens of millions of buyers. I won’t even be surprised if it outsells the iPhone 8 and iPhone 8 Plus.

Coming up with a more expensive handset raises the average selling prices of iPhones. It can increase Apple’s operating margins.

I Know First has a bullish one-year algorithmic market trend forecast for AAPL.

Do not worry about Apple (AAPL) trending down to below $159 last week. The September 12 product launch event of Apple will unveil the latest iPhone models. New phones could boost Apple to record revenue this coming Christmas/holiday quarter. Rumor has it that the iPhone 8 and iPhone 8 Plus won’t be the only phone models to be revealed. A $1,000++ iPhone X flagship smartphone is also reportedly going to be launched. This is allegedly the 10th anniversary iPhone model.

(Source: Steve T-S)

Coming up with a more expensive handset will boost the average selling prices of Apple’s most important revenue contributor, the iPhone. I am highly confident that a $1,000 iPhone will still find tens of millions of eager buyers. In fact, the iPhone X may become the best-selling phone from Apple during these last months of 2017.

Why The iPhone X Will Be A Much-Coveted Product

A special 10th anniversary iPhone is going to be a must-have for Apple loyalists. My thinking is that the iPhone X is a one-time commemorative model that won’t see more versions. Next year, Apple will release the iPhone 8s and iPhone 8s Plus. However, my bet is there won’t be an iPhone Xs model.

A one-time-only commemorative iPhone with top-notch features which can match the Samsung (SSNLF) Galaxy S8’s features will generate more sales than the regular iPhone 8. It has always been the invidious advantage of Apple to be able to sell overpriced smartphones because of its hundreds of millions of loyal customers.

My guesstimate is that the iPhone X can sell 20 million units in China alone over a one-year period. The Chinese market has been waiting for a radical iteration of the iPhone. I think the iPhone X can match the iPhone 6’s success when it was first released in China.

The North American and European loyal customers of Apple will probably buy 20 to 30 million units of the iPhone X.

How Apple Will Benefit From Strong Sales of A $1,000 iPhone

Robust sales of the iPhone X will notably improve the operating margins of Apple. The iPhone contributes almost 70% of Apple’s revenue. A higher operating margin can lead to record profits for Apple. Record profits can inspire bulls to propel AAPL to beyond $170 next year.

The more income that Apple can generate, the easier it can pay off the interest payments over its more than $100 billion debt. Since it cannot repatriate its cash hoard abroad ($257 billion) without taking a huge tax charge, Apple has been loading up on debt to finance its share buyback program for the last two years.

A higher net income from selling more higher-margin iPhones also leads to Apple probably paying out higher dividends to its shareholders. Apple needs to pay more on dividends to attract value/income investors. Buffett invested $18 billion on Apple partly because it started paying dividends.

Buffett will probably buy more AAPL if Tim Cook will authorize annual dividend payments of $4/share. Since it generates so much cash, some investors are eager to see larger dividend payments from Apple. The company has yet to deliver an annual dividend payment of over $2.50.

Like what happened earlier this year, Buffett disclosing an increase in his AAPL position will most probably propel the stock higher.

Conclusion

Apple’s stock performance will still greatly depend on how many iPhone it sells. I know iPhone sales are stagnating over the recent quarters. However, selling fewer iPhones but doing it with higher average selling prices is good enough for me. There is a resilient demand for new iPhones because of Apple already has a substantial number of captured/loyal customers.

Apple’s prosperity is assured as long as it can sell 200 million phones every year.

(Source: Statista)

The iPhone 8 and the iPhone X will probably encourage hundreds of millions of people to update their iPhone 5 and iPhone 6 handsets. It is true that Apple has slow-dragged the features of its smartphones behind Samsung’s Galaxy S handsets. However, the iPhone loyalists stuck to their old iPhones and patiently waited for Apple to come up with better versions of the iPhone 7.

I see the stock hitting $165 to $170 by early next year if Apple reports holiday quarter 2017 iPhone sales of 75 million units or more.

I rate AAPL as a buy. My view is also shared by I Know First. AAPL has a bullish one-year forecast and the short and intermediate algorithmic trend forecasts are positive.

The bullish forecast of I Know First is in line with the optimistic monthly technical indicators and moving averages trend analysis of Apple.

Past I Know First Forecast Success with AAPL

I Know First’s algorithm has made accurate predictions on AAPL in the past, such as its bullish article published on September 18th, 2016. In the article, it explains that the more expensive 5.5-inch model comes at higher price tag/higher margin. Selling more of these bigger iPhone 7 models therefore leads to better operating margins for Apple. I understand people want better photos from their phones, which they could post them on Facebook (FB) and Instagram. Since the September 16th, 2016 forecast, AAPL shares increased by 37.26% in line with the I Know First algorithm’s forecast. See chart below.

(Source: Google Finance: AAPL)

This bullish forecast for AAPL was sent to I Know First subscribers on September 18th, 2016. To subscribe today click here.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.