It's one week from the arrival of Apple's (AAPL) iPhone X. If you're one of the lucky few (like me) to get yours, you already know: The magic is back.
After years of tepid innovation after the iPhone 6, this is the first time since Siri appeared on the iPhone 4s that I felt the tinge of being wowed. The speed and effortlessness of Face ID. The luxurious full-body OLED screen. The front-and-rear Portrait Mode. Oh, baby.
And it likely sets the stage for Apple to become the world's first company with a $1 trillion market capitalization, which would require a rally to only around $195 per share from near $175 now. Just an 11 percent gain. For context, the shares are up nearly 17 percent from their September low (chart below).
Despite the questionable decisions over the iPhone 8 (why not 7s?), Apple Watch 3 celluar connectivity issues and iPhone X supply chain woes, Wall Street is getting bulled up once again. RBC Capital Markets analysts are looking for double-digit earnings-per-share growth over the next two years. They see that coming from higher average iPhone selling prices (iPhone X starts at $999 vs. $618 average iPhone selling price last quarter), a mix shift toward high-margin services (App Store and Apple Music) and the possibility of tax reform out of Washington.
On that last point, Apple is holding $262 billion in cash and cash-like investments, much of it offshore. With Republicans in Congress looking to lower the corporate tax rate and establish a reduced short-term repatriation rate, a sizable portion of that hoard could be domesticated -- and then returned to shareholders as dividends or share buybacks. Possibly as a special one-time dividend.
Two major doubts are fading: The company's ability to reaccelerate iPhone demand (amid worries about market saturation) and a return to growth in China. Disappointment with the iPhone 7 last year resulted in a 12 percent year-over-year decline in iPhone revenues. The March 2018 quarter should see growth of 19 percent as iPhone X supply catches up with demand, according to RBC.
Last quarter, Greater China sales increased 12 percent. Even before the iPhone X launched.
Upside kickers include reports Apple is looking to bring Face ID and full-body screens to the iPad, efforts in augmented reality and virtual reality, and the coming launch of the Homepod smart speaker. $1 trillion cometh.