Understanding Apple's Installed Base

Goldman Sachs’ Simona Jankowski mentioned that the iPhone installed base model had been revised to account for the disclosures made by management during the March quarter earnings call.

Jankowski maintained a Buy rating on Apple Inc. AAPL, while lowering the price target from $136 to $124.

Management Update

The analyst stated that management had stated that the iPhone installed base had grown by more than 80 percent over the last two years and that the iPhone 6s product cycle had been slightly higher than the iPhone 5s, although below the iPhone 6.

In addition, “the new adds from other platforms (“switchers”) over the past two quarters has been the highest in Apple’s history over any 6-month period,” Janowski said.

Revisions To Expectations

Based on management’s comments, Jankowski now expects iPhone upgrades to 9 percent and 20 percent year on year in CY16 and CY17, respectively.

The analyst pointed out that the CY17 growth rate was based on expectations of a larger installed based at the end of CY16, rather than being driven by an upgrade rate reacceleration.

“We view our iPhone unit forecasts as conservative, given the significantly lower assumed upgrade rate and declining new adds,” Jankowski went on to say.

The analyst expects to see potential upside driven by stronger U.S. demand, given that Goldman Sachs’ recent survey suggested meaningful pent-up demand.