Call of the week: Apple sets the stage for AR to become the next killer app

It looks like Apple’s (AAPL) big product-launch event lived up to the hype. The tech giant wowed many on Wall Street when it unveiled three new iPhones, a new smartwatch and a 4K TV, successfully silencing critics who have argued the company had lost its creative edge.

Many analysts expect iPhone users to ditch their current phones and buy one of Apple’s new models. High demand for the iPhone X, iPhone 8 and iPhone 8 Plus will give Apple a significant boost in fiscal 2018. In a note to clients this week, analysts at Nomura wrote that the “new iPhone launches generally met high expectations” and that the “high ASP, powerful, lovely new phones” will be launched into a “loyal and hungry installed base.” That upbeat sentiment was echoed by RBC’s Amit Daryanani, who predicts the new line-up will “enable one of the strongest iPhone cycles in years.” Apple’s big-ticket item, the much-hyped iPhone X, is one of the main reasons why analysts are so bullish about this iPhone cycle. Well-known analyst Gene Munster of Loup Ventures estimates about 20% of all new iPhone buyers will opt for the $999 premium phone.

But it’s not just the hardware that’s captivating the Street and Apple fans. The company’s foray into augmented reality is generating a lot of excitement. Morgan Stanley wrote in a note to clients that Apple has set the stage for AR to become the “next killer app that accelerates smartphone upgrades and drives increased services monetization and growth.” The firm has a $182 price target on the stock with a bull case valuation at $253, which represents upside potential of about 60%.

Apple shares were last trading up 1.1% at $159.99 a share.