CLSA's Mixed Bag For Apple: iPhone Retention Rates Drop Heavily, But Purchase Intentions Show Upside

While iPhone retention seems lower, Apple Inc. AAPL remains poised for market share gains. CLSA's Avi Silver maintained a Buy rating for the company, with a price target of $128.

The recent March CRR purchase intention survey indicated stabilizing smartphone demand in China in 1Q, versus the previous quarter. The survey showed 25.6 percent of respondents planned to purchase a new phone within 12 months, analyst Avi Silver mentioned.

Positive And Negative

With 50 percent of planned purchases for iPhone, versus its 40 percent installed base, purchase intentions suggested that Apple would gain market share. Silver added, however, that the iPhone retention rate had declined from 94 percent in December to 82 percent in March, with Huawei and Xiaomi gaining some traction.

“While some of this sentiment may correlate with product launches, Apple’s stickiness in China vs other regions and the affinity towards local brands (which until now has hurt Samsung, but not Apple) is an important issue for the stock,” the analyst wrote.

Other Takeaways

Silver mentioned other takeaways from the survey as:

• 9 percent of planned iPhone purchasers intend to buy the iPhone SE
• Continued appetite for higher memory, with 87 percent responded opting for 64/128GB models, versus 82 percent in December
• Demand for legacy or cheaper models, including the iPhone SE, remains robust at 30 percent of the mix, versus 27 percent in December