Credit Suisse upped its production targets for Apple Inc.'s (AAPL) iPhone and reiterated its "Outperform" rating and $170 price target for the company's stock today. "We remain convinced that the iPhone 8 product cycle will be significant in terms of driving multi-year unit growth, and we maintain our conviction on Apple's ability to introduce new higher pricing tiers with an improved mix," the note's authors wrote.

Based on updates from Credit Suisse's Asia team, the research firm increased its full-year estimates for iPhone and iPhone 8 production. According to the firm, Apple is targeting production of 112 million units of the iPhone 8, an increase of 13 percent from a year ago. Credit Suisse also increased its full-year forecast for overall iPhone production to 241 million units from its earlier estimate of 229 million units. (See also: Apple Stock Could Fall to $110 in Coming Months.)

While there have been concerns about the higher price points for the latest iPhones, Credit Suisse analysts do not seem to be overly worried about the development. They believe that increased production estimates coupled with growth in the company's Services business will help offset increased production costs for the iPhone 8. "Given its affluent user base, a significant feature upgrade, limited price elasticity shown so far, as well as Samsung's higher pricing points of the  S8 devices, we believe our ASP assumptions could prove conservative at $676/$704 for CY17/CY18," the analysts write. (See also: The iPhone's Next Edition May Cost $1,000 or More.)

Analysts at Credit Suisse also reiterated their earlier assessment of Apple's Services business, which they believe will account for one-third of its gross profits by 2020 and will have margins above 40 percent. Apple's shares have had a sterling year, so far, rising almost 27 percent on the back of investor enthusiasm for the iPhone 8. Apple stock closed today at $145.16, down almost 1 percent from the day's start. (See also: Apple Rises on Services and iPhone X Bullishness.)

 

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