Apple's (AAPL) Price Target Trimmed at BTIG on Concerns of Longer Upgrade Cycles

BTIG maintained a Buy rating on Apple (NASDAQ: AAPL) but lowered its price target to $130.00 (from $141.00). Analyst Walter Piecyk said he is more conservative on the upgrade cycle for existing users. He also noted rising competition from Samsung and potential for a longer wait for a return to growth.

"The sluggish phone sales in the US and overseas are largely accounted for in the expectation for an 18% decline in iPhones sold in the March quarter compared to last year. In fact, it’s possible that Apple could deliver upside on our 50 million estimate. However, we have broader concerns that there is a structural change underway in the pace of upgrades. It will take a few quarters and the launch of the next iPhone to confirm if end users are, in fact, holding onto their phones longer. Many believe that longer upgrade cycles are tied to the bi-annual cycles of Apple’s S model iPhones but the decline this year has been more steep than prior cycles," said Piecyk.

Discussing Samsung, the analyst said, "We have been surprised to hear the positive commentary around the launch of the Galaxy S7. There did not appear to be anything groundbreaking in this product revision, but the feedback from operators on the interest in this product has been better than we have heard in some time. Apple’s launch of larger screen iPhones in 2014 has aided in share gains against other operating systems, but we are less confident that incremental gains can provide the same tailwind to growth going forward."

Piecyk added, "We no longer expect Apple to return to revenue growth this Fiscal year and forecast a 4% decline in revenue for the year. The revenue mix shift away from iPhones should also provide an incremental headwind to margins, so we now also forecast a 3.5% decline in EPS this Fiscal year. We expect Apple to return to revenue growth in Fiscal 2017 (+3%) which should be further leveraged by their persistent share repurchase program, resulting in high single digit EPS growth."

BTIG lowered fiscal 2016 and 2017 EPS estimates 54c and 53c respectively to $8.87 and $9.57.

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $110.96 yesterday.

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