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July 21, 2019, 10:46 a.m. EDT

Apple stock gets an upgrade as analyst sees ‘compelling’ reason to buy forthcoming iPhone models

Raymond James says Apple is likely to offer a lower-priced 5G model in 2020, helping drive upgrades

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By Emily Bary

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The coming iPhone new product cycle may be a non-event, but rising conviction in a strong 2020 lineup has one analyst feeling bullish about Apple Inc.’s prospects.

Raymond James analyst Chris Caso upgraded Apple shares /zigman2/quotes/202934861/composite AAPL -1.40%  to outperform from market perform on Thursday, writing of his growing optimism for the 5G iPhone models that the company is expected to launch next year. Caso now believes that Apple will offer 5G models across the price spectrum, helping to provide a “compelling” reason for upgrades at a time when Apple is increasingly selling “legacy” devices.

“With an aging installed base, we think a reasonably priced 5G phone will be a very compelling upgrade,” Caso said in his note to clients. “While there’s some question about the customer utility for 5G, we think there’s enough sweat and money being spent by the carriers on this technology that they will convince customers of the utility.”

Read: Apple’s services business could reaccelerate in the second half of the year, says Morgan Stanley

Caso was initially concerned that Apple might not be able to get 5G iPhones launched next year—around the same time as its peers—due to its supplier choices, but that view “changed when Apple settled with Qualcomm and decided to use its modem in the 2020 iPhone,” wrote Caso, who set a $250 price target on Apple shares.

He said it’s “at least a reasonable assumption for a cycle including a 5G phone at a mainstream, ~$750 price point,” which could help reignite Apple’s iPhone sales. The stock is up 0.3% in premarket trading.

Don’t miss: Apple ‘fundamental deterioration’ to last into 2020, analyst predicts

A stronger-than-expected 5G launch could also buoy Apple suppliers, particularly Skyworks Solutions Inc. /zigman2/quotes/201417573/composite SWKS +1.84% , which was also the subject of a Raymond James upgrade to outperform on Thursday. “Among chip suppliers, we believe Skyworks stands to gain the biggest incremental benefit from a stronger product cycle, as both content and units increase, and we see limited competitive pressure at least through 2020,” Caso said.

See also: The ‘law of large numbers’ could crash Apple’s services party

He set a $90 target on Skyworks shares, which have gained 20% so far this year, as the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.32%  has risen 19%. Apple’s stock has climbed 29% in that time, while the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.38% , of which Apple is a component, has increased 17%.

US : U.S.: Nasdaq
$ 266.92
-3.79 -1.40%
Volume: 32.18M
Dec. 9, 2019 4:00p
P/E Ratio
Dividend Yield
Market Cap
$1202.84 billion
Rev. per Employee
US : U.S.: Nasdaq
$ 103.23
+1.87 +1.84%
Volume: 2.89M
Dec. 9, 2019 4:00p
P/E Ratio
Dividend Yield
Market Cap
$17.27 billion
Rev. per Employee
-9.95 -0.32%
Volume: 1.60B
Dec. 9, 2019 5:16p
US : Dow Jones Global
-105.46 -0.38%
Volume: 219.07M
Dec. 9, 2019 5:16p

Emily Bary is a MarketWatch reporter based in New York.

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