Canaccord Says Apple's (AAPL) Second-Half Could Improve on New Products, But Robust User Base is Growth Driver

August 22, 2016 11:33 AM EDT
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Canaccord Genuity affirms Apple (Nasdaq: AAPL) with a Buy rating and $109 price target following H116 analysis.

Analyst T. Michael Walkley commented today, Apple captured strong share of the premium-tier global smartphone market during Q2/C2016 with 75% of industry profits but down from over 90% in Q1 due to Samsung improving profits driven by streamlining their product lines along with strong demand for the Galaxy S7. Also, our recent U.S. surveys indicate stronger high-end Samsung sales versus Apple during Q3/16 as consumers delay iPhone purchases ahead of the iPhone 7 launch and Samsung increases advertising and promotional activities.

Following a soft 1H/2016 for global premium tier smartphone sales, we expect improved results in 2H/2016 and C2017 with new smartphone introductions while Apple also continues to monetize the large installed iPhone base through services and other cross-sell opportunities. While our survey work indicates consumers have delayed upgrading or purchasing an iPhone the past several months, we expect the iPhone 7 and especially new iPhones in 2018 to reaccelerate iPhone sales.

We believe the 2015 iPhone installed base of 506M subscribers provides a larger base for Apple to monetize through additional products and services. Therefore, despite our expectations for down year-over-year iPhone sales for the next couple quarters, we believe the growing, loyal, and sticky iPhone installed base provides Apple with long-term opportunities to drive further top-line growth through additional products, services, and software sales, the analyst noted.

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