The expected release of the iPhone 8 later this year could be a game changer for Apple as key new features are incorporated leading to a spike in sales, according to Goldman Sachs, which boosted its earnings outlook and price target estimate for the tech giant Monday. "Following recent industry commentary, we are increasingly confident that the upcoming iPhone 8 will include AR [augmented reality] technology that represents a significant feature upgrade from prior iterations," equity analyst Simona Jankowski wrote in a research note. According to her analysis, the technology, which uses digitally generated graphics, has the potential to become a "key differentiator" for the 10-year-old device. Apple, 1 year Source: FactSet "This is a significant step-up in innovation vs. the prior two product cycle, especially when viewed in conjunction with the potential significant form factor change enabled by the move to an OLED display (e.g. removal of the bezels and the home button)," she wrote. The analyst thinks optical component vendor Lumentum , whose 3-D motion sensor lasers are used in Microsoft's gaming console Xbox 360 and PCs, could be at the forefront of helping Apple deliver the technology. "Lumentum's management expects 3-D sensing to be a 'significant growth opportunity over the coming years' and highlighted that the market could be > $1bn over time," Jankowski wrote. Goldman Sachs says similar trends are viewed among laser competitors Finisar and IIVI, which are increasing capacity to address this emerging opportunity. "As discussed in our 2017 outlook, augmented reality (AR) could be the new killer app to reinvigorate upgrade demand for premium smartphones and in particular the iPhone," Jankowski wrote. Along with Goldman Sachs, industry trends show computer-generated simulations of 3-D images, also known as virtual reality, could spark the next wave of technological advances, potentially becoming a $150 billion industry by 2022, according to Bank of America. In her note, Jankowski increased her iPhone sales estimates for fiscal 2017 to 230 million units from 227.3 million units, and 2018 estimates to 235.9 million units from 231.5 million units. The firm's 12-month price target for Apple was also raised to $150 from $133, implying a gain of nearly 14 percent from Friday's close. In the past year, the tech giant's shares are up 42 percent, hovering near a record price.
