Apple (AAPL) iPhone 7/7+ Preorders Strong as Expected, But Multiple Expansion Opportunity Maybe Limited - Wells Fargo

September 13, 2016 11:36 AM EDT
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Wells Fargo affirms Apple (Nasdaq: AAPL) at Market Perform with a valuation range of $105 - $120 following intial carrier data for iPhone 7/7+ pre-orders, with T-Mobile and Sprint both touting results.

Analyst Maynard Um commented today, T-Mobile announced iPhone 7 and 7 Plus pre-orders were up 4x vs the iPhone 6 (from Friday to Monday) and Sprint announced pre-orders up nearly 4x (up 375% in first three days) vs the iPhone 6S while Verizon and AT&T have not announced pre-order figures yet. The strength is consistent with our view that aggressive carrier promotions (given we believe this may be the last year for a large base of 2-year contract subscribers to churn) should help to drive iPhone 7/7 Plus sales. The big 4 U.S. carriers have not disappointed with promotions for a free upgrade from an iPhone 6/6S as long as the customer remains with the carrier for two years (monthly credits to offset the EIP device fees). Preorders at TMUS and Sprint may also be helped by larger subscriber bases versus previous year with TMUS’s subscriber base 31% greater than 2014 and S 3% higher than from 2015.

We believe early momentum is a good sign for AAPL. However, we believe multiple expansion will be limited given limited visibility and some concern into the March quarter and while we maintain our view that Street estimates for December quarter may be low, in part due to the extra week in the quarter, we do not believe there is material upside and expect the combination of these to result in AAPL shares being rangebound, the analyst noted

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