Credit Suisse Keeps Apple's $150 Target Despite Expected Weak iPhone Launch
Despite expectations of a weaker product cycle in the near term, Credit Suisse’s Kulbinder Garcha believes Apple Inc. (NASDAQ: AAPL) offers a favorable risk/reward profile.
Garcha reiterated an Outperform rating on the company, with a $150 price target.
“Given high retention rates, a superior ecosystem, and a multi-product compute advantage, we believe FCF of ~$67bn should be sustainable LT,” the analyst mentioned.
Muted iPhone 7 Cycle
However, analysis of the installed base suggests that the iPhone 7 cycle is likely to be muted, although it's expected to be followed by an iPhone 8 “Super Cycle” in 2018.
“Our installed base analysis shows iPhone units troughing in 2016 at 207mn before rising to ~250mn in 2018 driven primarily by a quickening replacement rate of 30 months in 2018 from 32 months in 2017,” Garcha explained.
The analyst also pointed out that there have been investor concerns that the innovation driving this super cycle might not be sufficiently significant, since many Android devices also come with the expected features.
On the other hand, Garcha believes the market is still to appreciate Apple’s services, stating that “over time, it should become apparent as Services GP grows from 15 percent of Corporate GP today to ~30 percent by 2020, even without a major acquisition.”
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