Apple (AAPL) Upgraded to Buy with $600 Price Target by Jefferies

An analyst at Jefferies, a global investment banking firm upgraded his rating for the shares of Apple (NASDAQ:AAPL)  from neutral to buy and raised his price target for the stock from $425 to $600 per share after visiting the tech giant’s suppliers in China.

Peter Misek, senior technology analyst at Jefferies noted that Apple’s suppliers in Asia demonstrated a “substantial shift” in their attitudes toward the new devices of the tech giant and they became “far more lenient” on their pricing.

“In contrast to earlier this year when suppliers boasted that Apple would not be able to push them around anymore, they are now scrambling to be in Apple’s supply chain as competitor ramps have not gone as planned,” wrote Misek in his note to investors.

The senior technology analyst boosted his price target for the stock by 41% in anticipation for a growth gross margin. Misek projected that Apple would achieve a gross margin of 39.8% compared with his previous estimate at 36.3%. The consensus estimate of Wall Street analysts was 37.4%.

In addition, Misek estimated that Apple might experience a bigger upgrade opportunity for its iPhone 6 from “iPhone 5S/5C cycle.” He estimated that 85 million iPhoes will be eligible for an upgrade when Apple launches the iPhone 6. Furthermore, he projected that additional 5 million to 10 million consumers who did not upgrade their devices to iPhone 5S or iPhone 5C might join the iPhone 6 bandwagon.

Last month, there had been reports that Chinese consumers prefer the iPhone 5S than the iPhone 5C. According to SinaTech, the iPhone 5S became increasingly popular in China and the device was out stock in all of the eight stores in the country.

Misek previously had a bearish conviction for the shares of Apple because of ‘terrible yields’ on the production of the finger print sensor of the iPhone 5S. He estimated that the tech giant will only be able to produce around 5 million to 10 million iPhone 5S and 20 million iPhone 5C for the September quarter.

With regard to the iPhone 6, Misek said that suppliers informed him that Apple is planning to sport its next flagship device with a 4.8-inch screen. He believed that investors would become more enthusiastic as the tech giant moves forward in developing the device.