In a research note to investors, Goldman Sachs analyst Simona Jankowski raised her price target for Apple (AAPL) to $150 from $133, citing increasing confidence in the outlook for the iPhone 8 cycle in the second half of the year. The analyst believes that the inclusion of 3D sensing functionality is likely in the next device, which could enable a "robust" augmented reality feature set.

3D SENSING: In a note this morning, Goldman Sachs' Jankowski raised her price target for Apple to $150 from $133 as she expects a "very strong" upcoming upgrade cycle given iPhone 8's potential major new features. Industry data points last week, including the earnings report from optical supplier Lumentum (LITE), suggest that the inclusion of 3D sensing functionality is increasingly likely in the next iPhone, Jankowski pointed out. The analyst argued that this could enable a "robust" augmented reality feature set, which would be a "significant step-up in innovation" for the 10-year anniversary smartphone, especially when viewed in conjunction with the potential significant form factor change enabled by the move to an OLED display. Jankowski noted that augmented reality could be "the new killer app" to reinvigorate upgrade demand for premium smartphones and in particular the iPhone. Additionally, she said that her supply-chain channel checks point to a third iPhone model with a 5.8 inch screen that will be more expensive than the 5.5 inch and 4.7 inch versions. The analyst reiterated a Buy rating on Apple's shares.

APPLE SERVICES UNDERVALUED: UBS analyst Steven Milunovich said in a research note of his own that Apple's management has emphasized the importance of services the past year. Noting that he views Apple as a platform vendor with hardware and services intertwined, the analyst pointed out that given his sum-of-the-parts analysts, the company's stock would be at least 10% higher if Apple services were valued similarly to PayPal (PYPL). Further, Milunovich said services currently contributes profit greater than all non-iPhone segments combined and should add two points to total revenue growth and boost the gross margin by about 40bps annually given its estimated gross margin close to 60%. By 2020 services might constitute 17% of revenue and 25% of profit, he contended. Last month, Macquarie analyst Ben Schachter had voiced a similar opinion, saying services remain a "much underappreciated and misunderstood segment" of Apple. The analyst told investors that he believes App Store revenue will be the key gross margin driver for the company over the next five years.

ADDITIONAL OLED PANELS FOR IPHONES: According to a report by The Korea Herald, Samsung Electronics (SSNLF) subsidiary Samsung Display has been chosen by Apple to supply an additional 60 million units of OLED panels for the next iPhone. Previously, industry sources had said that the new iPhone will come in two to three variants, with only the premium model featuring an OLED screen, the publication noted, adding that with the increased panel supply the OLED adoption could be expanded.

PRICE ACTION: In morning trading, shares of Apple gained over 1% to $133.59. Earlier in the session, Apple hit a 52-week high at $133.82 per share. Over the last month, Apple shares have advanced by more than 12%.