Credit Suisse, Citi, Brean All Talking About Health Of Apple's iPhone Business

Citi analyst Jim Suva said Apple Inc. AAPL's iPhone comps get very difficult during the next few quarters amidst a tough macro backdrop with smartphone unit growth decelerating to high single digits. However, the analyst noted that the upcoming iPhone 7 launch and emerging markets should drive unit growth in the second half.

"Given March quarter iPhone unit expectations for a negative -15% year over year decline (following +37% iPhone unit growth in FY2015), investor attention remains focused on whether Apple can grow iPhone units again. We believe the answer is yes and this will occur in the September 2016 quarter," Suva wrote in a client note.

Suva noted: "Consensus is currently modeling for -3% y/y unit declines in June, followed by +1 to +3% y/y unit growth in Sept and December quarters. That said, we believe the iPhone emerging market potential is substantial and Apple's pricing strategy to reduce the starting price point of iPhone SE to US$399 is clearly intended to gain more share in the emerging markets (India and rest of APAC) where phones for less than US$400 comprise 80% of unit sales."

The analyst highlighted that Apple currently has 2 percent share in India for calendar year 2015 and believes if the company were to increase its market share to be similar to that in China (about 13 percent) this would increase iPhone units by 15-20 million units.

Looking forward, Suva believes 2016 will be a year "where Apple pulls together the fabric of this ecosystem that expands its total available market (TAM) including emerging markets as well as stronger enterprise push, healthcare and fitness via Apple Watch, Apple Cloud, financial services via Apple Pay that goes beyond purchase transactions (such as hotel keys, driver's licenses, loyalty programs, etc.), Apple TV, and potentially a few years down the road an Apple Car."

On the capital returns front, the analyst said: "We believe Apple is likely to increase their total capital returns (share buybacks + dividends) program by at least 20% from $200,000 currently (to be returned by March 2017) to $240,000 (to be returned to shareholders by March 2018), comprising of dividends and share buybacks."

Suva reiterated his Buy rating, with a target price of $130 on Apple stock.

Credit Suisse And Brean Also Talking

Separately, Credit Suisse expects gross profit from Apple's Services unit could more than double by 2020. The brokerage also reiterated its Outperform rating and raised price target to $150 from $140, and hiked its CY2016 EPS estimates by 2 percent to $9.46.

Meanwhile, Brean Capital said iPhone builds for the March quarter and June quarter remain "softer" than shipments. The brokerage cut the target price to $155 from $170, while maintaining a Buy rating on the stock.

Shares of Apple were up 1.25 percent at $111.37.