4 Reasons Credit Suisse Is Bullish On iPhone Sales

Credit Suisse’s Kulbinder Garcha believes news flows indicate that Apple Inc. AAPL is likely to see a stronger-than-anticipated cycle for the iPhone 7.

Garcha maintains an Outperform rating on the company with a price target of $150.

Long-Term Positives

“Given high retention rates, a superior ecosystem, and multi product compute advantage, we believe such elevated levels of earnings and FCF of ~$67 billion should be sustainable long term,” the analyst mentioned.

Garcha also expects the high margin services business to potentially account for 30 percent of the company’s gross profit in the long term.

Related Link: Galaxy Note 7 News Has Apple Shares On Fire Again

iPhone 7 Cycle

The analyst further believes there are several positive indicators that suggest a stronger than anticipated iPhone 7 cycle, saying, “We came away from our trip in Asia confident in the near-term iPhone demand as build plans were revised up.”

Garcha also pointed out that following the iPhone 7 launch, both T-Mobile Us Inc TMUS and Sprint Corp S announced that pre-orders had risen more than 400 percent from the next largest pre-order.

“A few weeks after the carriers announced strong pre-order numbers, Dialog preannounced and increased revenue guidance by 13 percent at the midpoint,” the analyst went on to say.

In addition, the woes with SAMSUNG ELECTRONIC KRW5000 SSNLF’s Galaxy Note 7 and the recent halt in production are only likely to help the iPhone 7.

“We estimate 48 million/75 million units in C3Q16/C4Q16 and 215 million/221 million/249 million in CY16/17/18,” Garcha stated.

Full ratings data available on Benzinga Pro.