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Apple shares to rally more than 30% the next 12 months because of its high margins, valuable brand: Analyst

Key Points
  • D.A. Davidson initiates coverage for Apple shares with a buy rating, citing the company's leadership position in the smartphone market.
  • "Apple remains one of the most significant technology companies in the world," analyst Tom Forte says.
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Apple shares to rally more than 30% the next 12 months

Apple will generate significant profits and sales growth over the next three years, according to one Wall Street firm.

D.A. Davidson initiated coverage for Apple shares with a buy rating, citing the company's leadership position in the smartphone market.

"With an eye for design, strong share in the premium (high margin) markets for smartphones and a growing (but select) number other devices, and the most valuable global brand, Apple remains one of the most significant technology companies in the world," analyst Tom Forte wrote in a note to clients Monday. "While the company faces a number of significant challenges, including the continued rise of Amazon and Google, its high margin and large sales figures enable the company to generate significant free cash flow, which it increasingly returns to shareholders via buybacks and dividends. "

Forte started his price target for Apple shares at $220, representing 33 percent upside to Monday's close.

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The analyst predicts the company will be able to grow its sales by 7.5 percent per year through fiscal 2020.

Apple shares rose 0.7 percent Tuesday in early trading. The company reports its fiscal second-quarter results after the market close.

— CNBC's Michael Bloom contributed to this story.

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