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Sterne Agee CRT Starts Apple (AAPL) at Buy; Over 50% of iPhone Users Haven't Upgraded to Larger Screens, Says Analyst

September 28, 2015 4:19 PM EDT
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Price: $171.48 -1.06%

Rating Summary:
    39 Buy, 25 Hold, 7 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 13 | Down: 11 | New: 11
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(Updated - September 29, 2015 7:34 AM EDT)

Sterne Agee CRT initiated coverage on Apple (NASDAQ: AAPL) with a Buy rating and a price target of $150. Analyst Rob Cihra think 2016 revenue can grow 4% on top of last years' 19% growth, as many users still haven't upgraded to a larger screen iPhone.

"... we believe Apple can keep pushing out the law-of-large numbers as it creates its own growth and captures value from others by engineering innovative hardware+software+services in a vertically-integrated model," said Cihra.

"With Apple’s installed base starved for larger screens, iPhone 6 drove a massive upgrade cycle that reaccelerated unit growth +36%Y/Y over the past 4 qtrs. That’s unsustainable and makes for tough comps in the Dec-qtr, where we estimate iPhones up just +3%Y/Y to 77mil. But market fears are down Y/Y, yet we estimate still <50% of the iPhone installed base will have upgraded to >4” screens exiting CY15, leaving runway for iPhones to still grow +5%Y/Y in CY16," continued the analyst.

Cihra added, "Growth in China has been huge the past 5yrs, jumping from 3% of revs in FY09-10 to 25% in FY15E. Now, however, China has swung to an investor worry (weak economy, stock market crash), but with iPhones +87%Y/Y in China last qtr in a smartphone mkt that otherwise declined, we believe Apple is benefiting from an installed base now upgrading to its aspirational brand. Ironically, it wasn't long ago that bears cited China as a risk, where high-priced Apple products could never sell."

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 $114.71 yesterday.



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