A new Apple analyst just came out with a very bullish call, saying Street underestimating 5G impact

Key Points
  • Wall Street is being too conservative with its estimates for the impact of 5G iPhones on Apple, Jefferies analyst Kyle McNealy says.
  • Wall Street is estimating that Apple will sell 190 million 5G devices in 2021. McNealy predicts 208 million iPhones will be sold then.
New iPhones on display in the Apple Marunouchi store in late 2019 in Tokyo, Japan. The most-bullish Apple stock price on Wall Street is predicated on an upcoming upgrade "supercycle" that will involve up to 350 million phones.
Tomohiro Ohsumi/Getty Images

Wall Street's estimates for the impact of 5G iPhones on Apple are too conservative, according to Jefferies' new Apple analyst.

"We think the Street underestimates the benefit Apple gets from this heading into the 5G cycle," Jefferies' equity analyst Kyle McNealy said in a note to clients Tuesday. McNealy has taken over coverage of Apple for Tim O'Shea, who departed Jefferies this summer to become an investment banker, according to his LinkedIn.

Customers and investors have been awaiting Apple's rollout of the 5G supported iPhones, which are reportedly set for release in 2020. Wall Street is estimating that Apple will sells 190 million 5G devices in 2021, which is 9% below the six-year average unit volume for the iPhone. McNealy said these estimates are too conservative. He estimates 208 million iPhones will be shipped in 2021.

McNealy said Apple analysts are discounting how many aging iPhones will need to be replenished. Even if upgrade cycles are at least every three, the demand will be there, he said.

The industry marketing push behind 5G will also be significant for Apple, said McNealy.

"The marketing machines at every wireless operator will be driving a 5G message with consumers," he added.

McNealy has a $260 price target, which places him among the top 5 most bullish Apple analysts on the Street, according to Apple currently trades around $218 per share.

McNealy also noted how different the 5G phone will be from past iPhones.

"Given the advanced technology and components, 5G devices will be high-end devices (where Apple holds dominant share)," said McNealy.

McNealy's revenue projections for 2020 and 2021 are 2% and 4% above Street expectations, respectively.

McNealy said the only "negative offset is a softer Chinese economy." IPhone sales have been slumping in China during the trade war with the U.S.

Shares of Apple rose 1.1% in premarket trading Tuesday.

—With reporting from CNBC's Michael Bloom.