Citigroup Raises Apple's Price Target, Sees What Consensus Is Missing

Citigroup raised its price target on Apple Inc. AAPL Monday from $120 to $135.

Analyst Jim Suva noted that the firm “conducted global field work revealing material changes that we believe consensus is not incorporating at this time.

“While most correctly see stronger than expected iPhone 6/6+ unit sell through, our edge is that purchasing trends are mix adjusted to a much stronger mix of iPhone 6/6+ memory (64/128GB selling strongest, with stock outs & longest lead times).”

Suva concluded that this scenario "will drive not only sales but also stronger margins and EPS that we see lasting more than one quarter with carriers in the US allowing consumers to upgrade before their standard 2 year contract expiration, which we call Device Acceleration.”

Suva also saw “signs of increased enterprises building apps native for iOS as well as non US countries curiously watching Apple Pay to assess the traction in the US as Apple Pay has not rolled out beyond the US at this time which we believe over time could shift Apple financials from its primary dependence solely on hardware and hit products.”

Lastly, Suva noted that “It is important to remember that iPhone units have a $200+ ASP and more than that gross margin contribution so any iPhone 6/6+ cannibalization of iPad mini is a positive for Apple earnings.”

The new target price of $135 was based on using a 13x PE multiple (SP500 16x).

Apple traded at $114.48 in the premarket, down 0.45 percent.