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Apple's 'Prolonged Product Cycle In Play,' Credit Suisse Raises PT To $145

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In a report published Thursday, Credit Suisse analyst Kulbinder Garcha commented on Apple Inc. (NASDAQ: AAPL)'s near-term iPhone strength, driven by a better-than-expected mix of iPhone 6 Plus devices.

Garcha estimated iPhone volume for March rose 38 percent year-over-year to 60 million (although 19 percent less quarter-over-quarter) based on recent supply chain commentary. The analyst noted that his installed base analysis shows total iPhone users of at least 400 million.

Given high retention rates and a "quickening replacement cycle" for 2015, the analyst suggested iPhone volumes could grow from 193 million in calendar year 2014 to 236 million in 2015 and 238 million in 2016. Moreover, a "healthy level" of 27 percent of volumes will consist of the higher margin iPhone 6 Plus.

Garcha also stated that around 10 percent of the iPhone installed base are indicating a preference to "definitely" purchasing an Apple Watch. This suggests initial Watch volumes could be as high as 40 million (versus consensus estimates of 20 million) at an average selling price of over $800 (versus consensus estimates of $500).

Garcha concluded that while his estimates are "materially above consensus," it may ultimately prove to be conservative as it does not take into account leverage from increased sales nor scope for expansion as cost curves on new products improve. In addition, the analyst is assuming "no significant impact" from new products or the monetization of services, including Apple Pay, Beats, HealthKit and HomeKit.

Shares of Apple remained Outperform rated, with a price target raised to $145 from a previous $140.

Latest Ratings for AAPL

DateFirmActionFromTo
Jan 2021Evercore ISI GroupMaintainsOutperform
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