Apple Inc. (AAPL) is on track to become the first trillion-dollar company in the stock market, according to RBC Capital's Amit Daryanani and Amitesh Bajad. In a note earlier today, the analysts wrote that Apple's latest iPhone release will set the company's stock up for the necessary gain.
"From a near-term perspective, we would note historically AAPL stock has done rather well into product launches with median return 90 days prior to launch at 15.6% (median outperformance vs. S&P 500 at 10.9%). This, we think, sets up AAPL well heading into the product cycle this time around," the analysts wrote. RBC currently has an Outperform rating on the stock with a price target of $176. At that level, the Cupertino, California-based company would have a valuation of $910 billion. The analysts attributed Apple's future growth to strong gross margin performance and better trends in mainland China. (See also: Apple's Q3: Investors 'Sit Back and Wait' on iPhone 8 Bombshell.)
According to reports, Apple plans to release three iPhones later this year. With an expected price range of between $900 and $1,100, two of the three iPhones are expected to be more expensive compared with previous versions. In a note earlier this year, analyst firm Goldman Sachs estimated that Apple's margins will receive a middling to substantial boost of between 2% and 6.3% from the "hardware premiumization" trend. (See also: Apple's $1,000 iPhone 8 Seen Fueling Stock Price.)
Apple has reported disappointing sales in China for the past couple of quarters. Most analysts believe that this is because the company is viewed as another smartphone hardware company there and has been beaten to the punch by cheaper vendors. However, the company is reportedly changing its strategy and boosting its presence in the smartphone services market in China. It has discontinued services and removed offensive apps from its iTunes store. Apple has also invested in R&D centers in the country and kowtowed to the Chinese government's requests. The results are showing. Even as revenue from its hardware sales in the region declined, the company reported that sales from China's App Store exceeded those of its U.S. counterpart this past quarter. (See also: Apple Names First Managing Director for China.)
RBC Capital has set a time frame of 12-18 months for Apple to reach the $1 trillion valuation target. In an interview earlier this year, Warren Buffett similarly voted for Apple to reach the trillion-dollar milestone soon. (See also: Is Apple an Undervalued Bank?.)