Can Apple Still Grow In 2016? Of Course It Can

• Apple Inc. AAPL shares have appreciated 5.25 percent year to date, although they dipped to a low of $103.12 on August 24.
• Citi’s Jim Suva has reiterated a Buy rating on the company, with a price target of $145.
• Suva expects the company to continue to grow in 2016, given that Apple continues to innovate while building a user friendly and robust ecosystem that goes beyond just the iPhone.

Analyst Jim Suva expects 2016 to be a year when the company “pulls together the fabric of this ecosystem,” expanding its TAM through hardware, software, healthcare, fitness and even financial services through Apply Cloud, Apple Watch, Apply Pay, Apple TV, and possibly an Apple Car in a few years.

Suva said that at present there was “even more conviction on how the Apple ecosystem is in the early innings of getting even stronger,” although he did agree that there were some valid near term concerns.

iPhone comps are expects to become very tough over the next few quarters, wit year on year unit comps expected at 40-50 percent, implying single digit unit growth.

According to the Citi report, “After solidly outperforming the S&P500 in 2014 and 1H 2015, Apple's shares have lagged the market during 2H'2015 on concerns of difficult iPhone year-over-year comps.”

The next catalyst for the stock is likely to be investor focus on the iPhone 7, which is expected to be launched in September 2016. The iPhone accounts for over 70 percent of Apple’s gross margin and therefore stock sentiment.

However, following the 37 percent unit growth seen in FY15, Suva expects units sold to remain largely flat during FY16, driven by difficult year on year comps, while expecting reacceleration in unit growth to 8 percent in FY17, following the launch of iPhone 7.