On Thursday, Jefferies analyst Kyle McNealy repeated his Buy rating on Apple stock and lifted his price target to $135 from $116.25, seeing a “strong setup in key regions” heading into the new iPhone cycle.
“We see historically low upgrade rates and handset subsidies in the U.S. reversing trend, share gains versus Huawei in Europe, and a massive legacy installed base in China looking to upgrade,” he writes in a research note.
In the U.S. market, he says, the upgrade rate has been running around 5% of the installed base per quarter, “well below the 8-10% seen in 2014-2016,” following the launch of iPhone 6. He also notes that carrier device subsidies are also near all-time lows. He thinks those trends are going to reverse “as wireless operators compete for new 5G users and look to monetize the new spectrum they’ve been building out…the new spectrum of course requires new upgraded handsets to leverage the additional capacity.”
As for Europe, he sees Apple as a beneficiary of lost market share at Huawei… And in China, he sees potential for a huge upgrade cycle. “Our proprietary survey work shows there’s a massive installed base of [iPhone] 6, 7, and 8 series devices in China which we expect would be likely to upgrade in the near future. We surveyed 6,000 smartphone users in China in early July. The results show an incredible 75% of iPhone respondents currently have a 6, 7, or 8 series model.”
MacDailyNews Take: Yup.
Just as iPhone this year is all about the camera, next year will be all about 5G. Get ready for the Mother of All iPhone Super Cycles! — MacDailyNews, December 23, 2019