JPMorgan Chase & Co. (NYSE: JPM) is more positive than the majority of Wall Street in regards to the next iPhone, but is cynical of Apple, Inc. (NASDAQ: AAPL) fast-growing business, services. "We are trading here because people are optimistic about this next iPhone cycle." People who look at business services still have a lot of questions, "JPMorgan analyst Rod Hall told CNBC's" Fast Money: Halftime Report "on Monday. "But when you look at the iPhone cycle, we do not think people have factored in just how strong of an iPhone cycle this is going to be."
Hall elevated his price target to $ 165 from $ 142, restating his overweight rating on the stock. The average target price is $ 149.49, according to FactSet. "We believe there's a lot of potential for momentum on that new iPhone. Now it depends on Apple delivering good product, but we see a lot of evidence that there is a good product in the pipeline here," Hall said.
Hall stated that he is the prospective for three upcoming iPhones, at least some of which would feature wireless charging, glass fronts and backs, and a feature that allowed users to transfer photos after they were taken. That would come after two years of weak replacement cycles, Hall said. "This cycle has been talked about a lot but it really still under-appreciated when you look at how the market is forecasting numbers for next year," Hall said.
Apple still makes most of its profits from the iPhone. However, its services segment, including Apple Music, AppleCare and Apple Pay, was the fastest-growing revenue segment last quarter, increasing 18 percent year-over-year, in contrast to 5 percent iPhone growth. But Hall said he's "not super optimistic" about Apple's software ambitions.
"I think that's a pretty challenging part of their business," Hall said. "We think there's a lot of potential for Apple, but they have not been able to capitalize on that. Still a lot of challenges around that business, we think. "
Tax policy, especially the rate on returning foreign earnings to U.S. soil, does not play a significant role in Apple's rating, Hall said. But it is an opportunity for Apple to pay more dividends on its shares, Hall said.
"The company has an awful lot of cash offshore," Hall said. "We would see it as a positive for Apple."