Credit Suisse Raises Apple Price Target

On Tuesday, analysts at Credit Suisse raised the price target on shares of Apple Inc. AAPL to $110 from $96 and maintained a Neutral rating.

Kulbinder Garcha wrote, "We raise our EPS estimates by 1%/11% for FY14/15 to $6.35/$8.28, based on our new proprietary iPhone analysis." Consequently, the new target price is based off a 12 times multiple of fiscal year 2015 estimates, with fully taxed net cash of $14 per share.

Garcha expects iPhone gross profit dollars to grow 45 percent from fiscal year 2013 to fiscal year 2015, which equals gross profit dollar growth of $17 billion from the current run rate.

In addition, analysts anticipate that the new iPhone's average selling price will increase as demand increases, which will expand gross margins for the iPhone business.

Garcha feels Carl Icahn's 19 times multiple and $200 price target is too aggressive for three reasons:

1) While the global iPhone replacement rate accelerates from 23 months to 21 months, it's unlikely to sustain such acceleration.
2) Apple is benefiting from an even higher mix in memory/SKU driving gross margins of 44 percent for iPhone – and risks here are to the downside in the medium term.
3) A $603 billion company (3.5 percent of the S&P) will not rerate easily.

Shares of Apple Inc. recently traded at $100.37, up 0.56 percent.